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Optimism
about Latin American growth prospects continues to increase
The outlook for Latin America increased once again and accelerated
from the slow but persistent rise observed in the past months.
The region is now expected to expand 4.7% this year, 0.3 percentage
points above last month’s forecast and a full percentage point above the
pace expected at the beginning of the year.
This month’s upward revision was broad-based, as it was prompted
by better projections for four of the seven major economies in the region:
Brazil, Chile, Mexico and Venezuela with virtually unchanged forecasts for
Argentina, Colombia and Peru.
Rising
optimism for Brazil
The most important contribution to increased optimism about regional
growth prospects stemmed from Brazil, which represents 32.8% of Latin
American GDP.
Consensus Forecast panellists lifted the GDP growth forecast for
Brazil by 0.4 percentage points over last month to the current 4.1%.
The upward revision follows on a 0.2 percentage point upgrade last
month and was prompted by faster than anticipated growth in the second
quarter, as the strong pickup in global demand is now being accompanied by
a notable acceleration in the domestic economy.
Chile
benefits from strong commodity prices and booming external demand
The outlook for Chilean economic growth this year increased a notch
over last month to 5.0%, as the economy continues to benefit from robust
external demand and strong commodity prices.
As a result, exports increased a whopping 50% in the second quarter
over the same quarter last year.
Since robust domestic demand is likely to exert additional pressure
on consumer prices, the Central Bank has ended its long-lasting
accommodative stance and raised interest rates for the first time in the
current business cycle.
Mexico
seen more optimistically amid resurfacing link to the U.S. economy
The outlook for Mexican GDP growth in 2004 was lifted another notch
from 3.8% expected last month to the current 3.9%, which represents the
fourth consecutive month of higher forecasts. The improved
sentiment reflects restored confidence that the country has been re-linked
to the buoyant U.S. economy. Moreover, higher oil prices are
generating windfall profits and are providing the public sector with extra
spending power to boost economic activity.
Further
upward revisions to Venezuela outlook amid buoyant oil sector and Chávez
referendum victory
The strongest upward revision this month was once again applied to the
Venezuelan growth outlook. The economy is profiting from a strong
cyclical rebound, which puts the country at the helm of the region with
10.3% projected growth, up 1.2 percentage points from last month’s
forecast, as the high oil price boosts the country’s all-important oil
sector. In addition, political uncertainty related to the referendum
to recall the president that had loomed for months was significantly
reduced when incumbent president Chávez emerged as the winner in
mid-August. However, the double-digit expansion is achieved on the
back of a weak comparison base following a devastating recession last year.
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