Is the end of Latin American negative growth in sight?

International financial institutions forecast the end of red figures for Latin American growth in 2017

Latin American growth

In April, the International Monetary Fund estimated Latin American growth to be 1.1%, whereas the World Bank set its June forecast in 0.8%. Meanwhile, global growth was projected to be between 2.7% (WB) and 3.5% (IMF).

Forecasts expect net oil exporting countries to recover moderately as prices increase. In spite of last June’s Brent price drop to 45 USD per barrel, the market tendency remains positive. Mineral and metal exporters are also on a positive price trend and net commodity importers can still enjoy the current account benefits of low international market prices.

On the top end of the spectrum, several Central American countries, Argentina, Bolivia, Colombia, Paraguay and Peru are expected to have growth rates surpassing 2%. The World Bank attributes steady Argentinian growth to Mauricio Macri’s attempt to enhance fiscal discipline which is successfully stimulating private investment. Another country to benefit from increased private investment is Colombia, after the implementation of a much-debated structural tax reform that satisfied credit rating agencies.

Brazil, Chile, and Mexico are expected to grow at a rate between 0.1% and 2.0%. Chile paid the price of lower copper production due to strikes. Meanwhile, Brazil is attempting to enforce a public expenditure ceiling in the midst of increased unemployment and corruption scandals. Uncertainty also looms over Mexico. Although Trump’s protectionism did not have initial disastrous consequences, fear of the infamous ‘border tax’, according to the IMF “more than offset the positive impact of a stronger U.S. outlook and the depreciation of the currency”.

On the lower end of the spectrum, Ecuador and Venezuela are still expected to have negative growth figures, but with radically opposite prospects. Ecuador is rising out of recession and is implementing fiscal adjustments; Venezuela remains deep in political conflict and with no intention of reversing strong economic controls. As a consequence, the World Bank expected it to contract at a rate of 7.7%, and the IMF at a rate of 7.4%. It could reach the podium for the greatest-receding economy in the world.

LatinAmerican Post | María Medellín E.
Copy edited by Susana Cicchetto

We use cookies to improve our website. By continuing to use this website, you are giving consent to cookies being used. More details…