Latin American economies witness economic slowdown, coupled with skyrocketing inflation and depreciation of local currencies. While economic development of regional economies varies, pressing monetary and economic issues burden most Latin American countries. In light of global economic slowdown, regional exports continue stagnating, while rising energy and other commodity prices pressure trade balances. Deteriorating government revenue and pressing social issues burden state budgets.
This report comes in PPT.
Latin American economies recorded rather flat growth over 2016-2019, and while they witnessed strong recovery in 2021 after the pandemic-caused downturn, future growth prospects remain clouded. Persisting monetary and fiscal challenges, alongside a worsening global economic outlook in the face of Russia’s aggression, drag down Latin America’s economic growth forecasts.
The region is struggling to deal with yet another inflation crisis, following years of already elevated inflation levels. With some Latin American countries recording multi-digit inflation rates and rapidly depreciating local currencies, the region struggles to deal with global stagflation and the robust rise in commodity prices. Inflation in the region is projected to remain elevated throughout the forecast period, dragging down consumption, limiting productivity and hampering economic growth.
While some Latin American countries, like Brazil or Mexico, benefit from rising global demand for (and the price of) oil and its products, overall exports from the region stagnate as demand globally slows down. Moreover, while exports recovered after the COVID-19 shock, disruptions to global supply chains persist, preventing trade expansion. Latin American economies aim to negotiate new trade deals with key global players, including the US and China; however, any changes might take a long time to come into effect, not promising any major export breakthrough for the region.
The public finances of Latin American economies are set to be adversely affected by weakening tax revenue amid decelerating growth momentum, as well as increasing government spending aimed to shield consumers from rising living costs. Moreover, developing economies in the region are poised to witness local currency depreciation, financial instability and difficulties with balances of payments triggered by rapid monetary tightening across advanced global economies.
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