Latam: Toward a gradual recovery - BBVA

According to the Research Department at BBVA, the economic slowdown will end in 2016 and there will be a gradual recovery in 2017.

Key Quotes:

“The global outlook has improved slightly, especially in emerging Asia. Financial stress increased briefly after Brexit, but it was offset by central banks in advanced economies, which are postponing the normalization of their monetary policies. Global growth will increase slowly.”

“Slowdown of Latam GDP will end in 2016 (-0.9%) in 2016, with a gradual recovery in 2017 (1.8%). The fall in 2016 will mark the third year of growth below OECD’s, something that will also happen in 2017. Recovery in 2017 will be driven by the external sector and stronger investment in places like Argentina, Peru and Colombia.”

“Inflation, though still high in South America, continues to abate in most countries. Main exceptions are Argentina, Colombia and Uruguay, although in the first two inflation will start to come down in the next months. Lower exchange rate depreciation and weak demand will underpin lower inflation pressures.”

“Central banks adopt a more dovish bias, except in Colombia and Mexico . Lower inflation and weak domestic demand will allow central banks to have this more dovish bias. The main exception is Colombia, where there will be two more rate hikes, and Mexico, which will continue to synchronize with the interest rate hikes by the Fed.”