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Ever better outlook.
The outlook for regional economic growth continues to improve.
The expert panel expects the seven major Latin American economies
to grow by 3.9% in 2000, up 0.1% from last month’s Consensus.
However, increased scepticism over the global picture in 2001,
brought about by a projected slowdown in the United States, has affected
the outlook for the coming year and has brought down the regional forecast
from an average 4.2% last months to 4.1% in July.
This month’s regional economic growth outlook was driven by upgrades in
Peru and Venezuela, while the growth projections for all other countries
remained stable. Peru
profited from easing political concerns and stronger than expected data
releases, which was reflected in a 0.2% hike in projections over last
month to 4.7%. In Venezuela,
the continued oil bonanza is prompting the government to expand fiscal
spending, which should help the ailing economy to pull free from the grip
of recession. Panellists now
expect the economy to grow 3.1% in 2000, up from last month’s forecast
of 2.8%. The Colombian growth picture continues to be mixed with
growth expected to reach a meagre 2.6%.
Trailing close behind is Argentina with 2.9% in 2000.
Chile and Mexico remain ahead of the pack, with increases in Gross
Domestic Product of 6.1% and 5.6% respectively.
However, for 2001, Mexico carries the brunt of the “landing” --
soft or hard – of the US economy. According to the Consensus Forecast, it will be the only
country that will suffer a setback in its economic growth rate compared to
2000.
Inflation downward adjustment.
Latin America is without doubt making significant
inways to drive down inflation rates to international levels.
This month’s forecast saw a further downward adjustment in the
GDP-weighted average of regional inflation to 6.4%, 0.2% less than the
projections 30 days ago. Of
the seven countries surveyed only two, Chile and Colombia, saw minor
upticks in their forecasted inflation rates.
Argentina, Brazil, Peru and Venezuela are seen to contain consumer
price increases. It is
obvious that the strict monetary policy adopted by most of the countries
is paying off in terms of higher credibility of Central Banks and improved
inflationary expectations of market participants.
Panellists have also adjusted their inflation outlook for next year
and now project an average regional year-end inflation of 5.6% in 2001.
Historic elections prompt change in Mexico and
Venezuela Next.
The political arena was dominated by the 2 July presidential,
congressional and senatorial elections in Mexico. The candidate for the Alliance for Change, former Coca Cola
executive Vicente Fox, managed to oust the world’s longest ruling party,
the Party of Institutional Revolution (PRI, Partido Revolucionario
Institucional), from its throne and will assume the presidency on 1
December. Governing will not
come easy since the coalition parties failed to secure a majority in the
two chambers but the former state governor is considered an experienced
negotiator and political analysts are in general upbeat about the
possibility of political change. In
Venezuela, elections were postponed at the end of May due to technical
complications and have been rescheduled for 30 July.
Polls continue to show that President Hugo Chávez remains well
poised to win the presidential poll and that his political forces will
garner a strong presence in the new Assembly.
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