20181220-法国巴黎银行-LATIN_AMERICA_ECONOMIC_OUTLOOK_41页_4mb

Latin America Economic Outlook Summary

Core Content

This report provides an economic outlook for selected Latin American countries, focusing on economic growth, monetary policy, fiscal policy, and balance of payments. It also includes regional macroeconomic forecasts for 2019-2020.

Main Country Highlights

• Argentina: A painful economic adjustment is ongoing, marked by a severe recession, a confidence crisis, and massive currency depreciation. The country is facing a significant challenge in implementing a fiscal adjustment during an election year. We expect GDP to contract by 2.5% in 2018 and 1.5% in 2019, with inflation expected to rise sharply.

• Brazil: The economy is slowly recovering from a deep recession, with growth expected at 1.3% in 2018. A market-friendly president and low interest rates are expected to help recovery in 2019. However, fiscal policy remains a major issue, and a crucial social security reform is needed to stabilize the economy.

• Chile: The economy shows strong momentum, with a market-friendly government boosting business confidence. Growth is expected to be 4.0% in 2018 and 3.5% in 2019, although it is vulnerable to a global slowdown. The central bank has initiated monetary normalization.

• Colombia: The economy has shown steady growth, supported by a market-friendly president and favorable monetary conditions. However, it remains vulnerable to oil price fluctuations. The government is pushing for tax and fiscal reforms to reduce reliance on oil.

• Mexico: The new administration, led by President López Obrador (AMLO), has introduced policies that have affected market confidence. While the country's fiscal and current account positions are solid, AMLO's spending plans and potential US slowdown could pose risks to economic stability.

Regional Economic Forecasts

Key Economic Themes

Economic Growth

• Argentina: Expected to contract by 2.5% in 2018 and 1.5% in 2019, with a recovery anticipated in Q2 2019.
• Brazil: Expected to grow 1.3% in 2018, with a projected 3.0% growth in 2019 and 2.5% in 2020.
• Chile: Growth is expected to rise to 4.0% in 2018 and slow slightly to 3.5% in 2019.
• Colombia: Growth is forecasted to be 3.0% in 2018 and 3.5% in 2019, with continued support from oil prices and fiscal reforms.
• Mexico: Growth is expected to remain around 2.0% in 2019, with a forecast of 2.3% in 2018 and 1.6% in 2020.

Monetary Policy

• Argentina: Interest rates remain extremely high, with the BCRA aiming to stabilize inflation through a money base target. LELIQ rates are expected to decline gradually.
• Brazil: The central bank is expected to remain on hold until H2 2019, with inflation likely to remain above the target.
• Chile: The central bank has initiated a normalization cycle, with the TPM rate expected to reach 4.0% by 2019 and 4.5% by 2020.
• Colombia: The central bank is expected to initiate a normalization cycle in July 2019, with three 25bp hikes projected.
• Mexico: Banxico has continued to tighten monetary policy, with rates close to their peak. Inflation is expected to slow to 4.0% in 2019.

Fiscal Policy

• Argentina: The government is pursuing a fiscal adjustment to restore sustainability, with a target of a balanced primary budget in 2019 and a primary surplus in 2020. The fiscal adjustment is challenging due to a severe recession and election year.
• Brazil: The country faces unsustainable fiscal dynamics, with a structural primary deficit of 2% of GDP. A social security reform is crucial to stabilize public debt, which is currently at 77% of GDP.
• Chile: The government is enhancing fiscal discipline with a plan to reduce the budget deficit to 1.9% of GDP in 2018 and a structural deficit of 1.0% by 2022. Tax and social security reforms are key components.
• Colombia: A tax reform is taking center stage to simplify the tax system and widen the tax base. The government is targeting a 3.1% budget deficit in 2018, with a structural deficit of 1.9% of GDP.
• Mexico: The new administration has introduced policies that have raised concerns, and fiscal slippage could hinder further monetary tightening.

Key Risks and Challenges

• Argentina: Failure to implement the fiscal adjustment during a severe recession and global slowdown could reignite the confidence crisis.
• Brazil: Political uncertainty and the inability to pass fiscal reforms could delay recovery and inflation control.
• Chile: A global slowdown could negatively impact growth, given its open economy.
• Colombia: Weak congressional support and lower oil prices could hinder policy implementation.
• Mexico: Populist domestic policies and a faster-than-expected US slowdown could affect economic stability.

Conclusion

The Latin American region is navigating a complex economic landscape, with varying degrees of growth, inflation, and fiscal challenges across countries. While some nations like Chile and Colombia are showing signs of improvement, others such as Argentina and Brazil are struggling with fiscal and monetary issues. The success of economic recovery will largely depend on the implementation of necessary reforms and the stability of external conditions, particularly commodity prices and global economic trends.