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Latin America

Chile GDP (Q2)

Chile’s economy merely stagnated in Q2 and the chances are high that it will fall into recession over the second half of the year. Meanwhile, current account risks are continuing to build – with the deficit widening to more than 8% of GDP in Q2 – which will keep the peso on the backfoot.

18 August 2022

EM inflation nearing its peak

Aggregate EM inflation came in at its highest rate since 2008 last month, but there are signs that it is starting to stabilise and it should fall back in the coming months. For central banks in Emerging Europe and Latin America that have already hiked interest rates aggressively and are becoming increasingly concerned about growth, this may provide some space to wind down their tightening cycles. Asia Drop-In (25th Aug.): What’s the economic impact of a weak yen? What does the latest China-Taiwan flare-up mean for decoupling? How ugly are conditions in China’s real estate sector? Join economists from across our Asia services for this regular briefing on the region’s big investment stories. Register now.  

17 August 2022

Colombia: regional outperformer in 2022

The robust 1.5% q/q rise in Colombia’s GDP in Q2 suggests that the economy’s recovery will be among the strongest in the region this year. Strong growth, alongside upside inflation surprises and the fragile external position mean that the central bank’s tightening cycle has a bit further to run. We expect the policy rate to be raised to 10.50% by October (previously 9.50%), from 9.00% now.  

17 August 2022
More Publications

Colombia’s tax reform, inflation problems persist

The new tax bill unveiled by Colombia’s government, which aims to raise tax revenues to fund the government’s social programmes and “consolidate the fiscal adjustment” doesn’t change our view that the government’s debt-to-GDP ratio will continue to rise over the coming years. Meanwhile, the July inflation figures show that price pressures across the region remain acute, but central bank’s tightening cycles are still likely to come to an end over the next couple of months.

Challenges ahead for Brazil’s stock market

Brazil’s stock market has fared better than most this year, but we forecast it to fall ~15% over the rest of 2022. And while we expect it to rebound over the following couple of years, we think falling commodity prices and mounting fiscal risks will limit the scale of its rally.

Banxico to take its foot off the brakes

Mexico’s central bank (Banxico) hiked interest rates by 75bp, to 8.50%, for a second consecutive meeting yesterday but, amid mounting evidence that the economy is struggling and with inflation close to a peak, we think that the pace of tightening will slow from here. Our forecast is for the policy rate to reach 10.00% by year-end, which is a touch more hawkish than investors anticipate.

Mexico Industrial Production (Jun.)

Mexico’s industrial sector posted sluggish growth of just 0.1% m/m in June and the data suggest that the first estimate of Q2 GDP growth may be revised down. The backdrop of weakness in the US means that we expect Mexican industrial activity to stay soft over the rest of this year. But that is unlikely to deter Banxico from delivering further monetary tightening, including another 75bp hike, to 8.50%, later today.

Emerging Markets Capital Flows Monitor

Capital outflows from EMs have eased over the past month, helping to stabilise local asset prices. But we think outflows will pick up again before long. That’s a threat to those EMs whose current account deficits have widened or are widening sharply, including Turkey, Chile and parts of Central Europe. Emerging Europe Drop-In (11th Aug): We’re expecting downturns in Central and Eastern Europe, but how bad could it get? Join this 20-minute briefing on our Q3 Outlook report, including the latest on Turkey, Russia and whether Hungary’s forint has further to fall. Register now.

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