- Growth will be low in LatAm in 2015 and 2016, at 0.2% and 1.1% respectively. Confidence indicators are still weak, which is holding back private sector consumption and investment. Paraguay, Peru and Colombia will be countries that lead growth in 2015-16.
- We are revising our estimate for potential growth down to 2.7% for 2016-20, primarily due to the smaller boost for South America from China and commodities, while we are revising Mexico’s potential growth upwards from 2.8% to 3.4% for 2016-20.
- Inflation is holding up, above central bank targets, in particular due to fiscal idiosyncratic and weather-related shocks. Greater exchange rate depreciation of LatAm currencies has also been influential, even though the level of pass-through to domestic prices has not intensified.
- Growing dilemmas for central banks, except in Mexico. They face increased cyclical weakness but at the same time there is above-target inflation and greater currency depreciation. Mexico will remain in step with the Federal Reserve, as forecast three months ago, but Brazil and the Andean countries will disengage from it.
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