Latin America Economic Outlook. First quarter 2020

Summary

Latin America: gradual recovery in 2020-21, but a surge in uncertainty represents a risk

Key points

• Key points:
• Latin America's growth has been of only 0.6% in 2019, well below the previous year's rate (1.6%), the expectations at the beginning of the year (2.1%) and the potential GDP growth (close to 2.5%).
• A recovery is expected in 2020 and 2021: growth should reach 1.4% this year and 2.1% the next. This recovery would be based on the improvement of the global environment, some reduction in idiosyncratic uncertainty and an expansionary monetary policy in an environment of relatively low inflation.
• The recovery will be widespread, although heterogeneous across countries. GDP growth in the next biennium will be greater than 3% in Peru and Colombia, will converge to rates of around 2% in Brazil, Uruguay, Chile and Mexico. In Argentina the recession will continue in 2020, in a context of shortage of US-dollars and high inflation.
• Increasing growth, in a context of relatively low commodity prices and downside risks, will be a great challenge. On top of that, the countries in the region will have to face different types of vulnerabilities ahead, such as high public debt (Argentina and Brazil), institutional uncertainty (Chile), political uncertainty (Peru), policy uncertainty (Mexico), high inflation (Argentina and Uruguay) and relatively large current account deficits (Colombia).

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