{
  "title": "Navigating Through Global Cross Currents: Latest Outlook for Latin America and the Caribbean",
  "publication": "IMF Blog, January 23, 2017",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2017/01/23/navigating-through-global-cross-currents-latest-outlook-for-latin-america-and-the-caribbean",
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  "summary": "Anticipated shift in the U.S. policy mix: fiscal policy likely to become expansionary, while monetary policy is expected to tighten faster than previously expected because of stronger demand and inflation pressures.",
  "sections": [
    {
      "heading": "Global drivers and shifts",
      "content": "- Anticipated shift in the U.S. policy mix: fiscal policy likely to become expansionary, while monetary policy is expected to tighten faster than previously expected because of stronger demand and inflation pressures.\n- U.S. growth projections: \"growth is projected to rise to 2.3 percent in 2017 and 2.5 percent in 2018\" — a \"cumulative increase in GDP of ½ percentage point relative to the October forecast.\"\n- Consequences: increase in global long-term interest rates, a stronger dollar in real effective terms, and a moderation of capital flows to Latin America.\n- Improved outlook for other advanced economies and China for 2017–18, reflecting stronger activity in H2 2016 and projected policy stimulus.\n- Some recovery in commodity prices (especially metal and oil) driven by Chinese infrastructure and real estate investment, expected U.S. fiscal easing, and agreement among major petroleum producers to cut supply.\n- Caveat: \"commodity prices are still expected to remain low relative to their historical standards.\""
    },
    {
      "heading": "Regional aggregate outlook",
      "content": "- Regional growth projections:\n  - Contraction of 0.7 percent in 2016.\n  - Expansion by 1.2 percent in 2017.\n  - Expansion by 2.1 percent in 2018.\n- The projected recovery is weaker than the October forecast due to persistent weakness in some of the largest economies even as others see moderate growth.\n- Policy responses observed: easing monetary policy where appropriate, using available space to calibrate fiscal adjustment, and pursuing supply-side reforms."
    },
    {
      "heading": "South America — country specifics",
      "content": "- Brazil:\n  - Real GDP growth in 2017 is expected to turn positive and reach 0.2 percent.\n  - Continued drag from elevated unemployment and high private sector debt.\n  - Policy actions: measures to help highly indebted companies; reforms to reduce red tape and cost of doing business; constitutional amendment to cap central government noninterest spending in real terms approved; draft pension reform submitted to Congress; state-level adjustment and reform programs expected.\n  - Inflation declined rapidly and \"at end-2016 was below the upper limit of the tolerance band.\"\n  - Central bank \"accelerated significantly the pace of monetary policy easing\" citing weaker growth, faster disinflation, and progress with fiscal reform.\n- Argentina:\n  - Revised GDP growth projections: \"-2.4\" for 2016 and \"2.2 percent\" for 2017.\n  - Recovery drivers: higher real wages boosting consumption, stronger external demand supporting exports, and accelerating public investment.\n  - Policy notes: successful tax amnesty expected to help domestic demand and fiscal targets; inflation expected to fall significantly but remain slightly above the central bank’s target in 2017.\n  - Emphasis on continuing macroeconomic adjustment and strengthening institutional framework; supply-side reform agenda essential.\n- Colombia:\n  - Economic activity weaker than previously anticipated, \"growing by 0.3 percentage points lower in 2016 than projected earlier.\"\n  - Timely monetary and fiscal tightening helped narrow the current account deficit.\n  - Medium-term growth supported by the recently signed peace agreement and a structural tax reform to create space for infrastructure and social spending.\n- Chile:\n  - Growth projected at \"2.1 percent in 2017,\" after \"1.6 percent in 2016.\"\n  - Drivers: higher external demand, stronger outlook for copper prices, and significant monetary easing.\n  - Risks: uncertain regional outlook, higher interest rates abroad, and low domestic confidence.\n- Peru:\n  - Growth expected to reach \"4.3 percent in 2017\" due to expanding copper production, higher copper prices, rebound in public spending, and robust private consumption.\n  - With the output gap closing, focus should shift to gradual fiscal consolidation while preserving public infrastructure spending and growth-friendly structural reforms (decreasing informality, raising education levels, deepening capital markets, reducing red tape).\n- Ecuador:\n  - Economic outlook improved because of better access to international capital markets prompted by recovery in oil prices.\n- Venezuela:\n  - \"Remains in a deep economic crisis on a path to hyperinflation\" driven by a large fiscal deficit that has been monetized, extensive distortions, and severe import restrictions.\n  - \"Economic activity is projected to contract sharply in 2017, while inflation is expected to accelerate further.\""
    },
    {
      "heading": "Mexico, Central America, and the Caribbean",
      "content": "- Mexico:\n  - Moderate growth but entering difficult terrain; outlook clouded by uncertainty about U.S. trade policy and tighter financial conditions.\n  - Policy prescription: \"to maintain market confidence and put public debt firmly on a downward path, it is important to persevere with fiscal consolidation.\"\n  - Inflation rising after sharp peso depreciation and higher energy prices; tightening of monetary policy should help keep inflation expectations under control; further tightening only if needed to prevent second-round effects.\n- Central America and the Dominican Republic:\n  - Economic activity supported by faster U.S. growth.\n  - Risks from higher global interest rates and appreciation of the dollar, particularly for countries where exchange rates do not depreciate relative to the U.S. dollar.\n  - Inflation \"is low, at 2¼ percent,\" and external positions are robust given still low commodity prices and strong remittances in some countries.\n- Caribbean:\n  - Prospects improving with moderate growth projected for 2017.\n  - Tourism-dependent economies benefit from higher U.S. growth; commodity exporters benefit from somewhat higher commodity prices.\n  - Risks include withdrawal of correspondent banking relationships and U.S. policy uncertainty."
    },
    {
      "heading": "Policy recommendations and resilience measures",
      "content": "- Exchange rate policy:\n  - \"Exchange rate flexibility has served the region well and should remain the first line of defense against shocks.\"\n  - Well-established monetary policy frameworks are suited to limit exchange rate pass-through to consumer prices.\n- Financial sector and corporate balance sheets:\n  - Strong risk management practices and policies facilitating corporate balance sheet repair are critical to reduce vulnerabilities from tighter global financial conditions and sharp currency movements.\n- Fiscal policy:\n  - Countries should \"continue to use available space to calibrate fiscal adjustment,\" recognizing commodity prices are expected to remain low relative to historical levels.\n  - The pace of adjustment should depend on debt levels and market pressures.\n- Structural reforms:\n  - Beyond macro adjustment, priority reforms include decreasing informality and red tape, boosting infrastructure quality, improving education and rule of law — essential to support medium-term growth.\n\nAlejandro Werner, January 23, 2017 — Navigating Through Global Cross Currents: Latest Outlook for Latin America and the Caribbean\n\n---\n\n Content in this bundle\n\n- Navegar as contracorrentes mundiais: Perspectivas mais recentes para a América Latina e Caribe\n  - Navegar as contracorrentes mundiais: Perspectivas mais recentes para a América Latina e Caribe (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Navegar as contracorrentes mundiais: Perspectivas mais recentes para a América Latina e Caribe (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- global landscape has changed\n\nSource: https://www.imf.org/en/blogs/articles/2017/01/23/navigating-through-global-cross-currents-latest-outlook-for-latin-america-and-the-caribbean"
    }
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    "[Markdown version](/en/blogs/articles/2017/01/23/navigating-through-global-cross-currents-latest-outlook-for-latin-america-and-the-caribbean/index.md)",
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    "Authors: Alejandro Werner",
    "Published: January 23, 2017",
    "Anticipated shift in the U.S. policy mix: fiscal policy likely to become expansionary, while monetary policy is expected to tighten faster than previously expected because of stronger demand and inflation pressures.",
    "U.S. growth projections: \"growth is projected to rise to 2.3 percent in 2017 and 2.5 percent in 2018\" — a \"cumulative increase in GDP of ½ percentage point relative to the October forecast.\"",
    "Consequences: increase in global long-term interest rates, a stronger dollar in real effective terms, and a moderation of capital flows to Latin America.",
    "Improved outlook for other advanced economies and China for 2017–18, reflecting stronger activity in H2 2016 and projected policy stimulus.",
    "Some recovery in commodity prices (especially metal and oil) driven by Chinese infrastructure and real estate investment, expected U.S. fiscal easing, and agreement among major petroleum producers to cut supply.",
    "Caveat: \"commodity prices are still expected to remain low relative to their historical standards.\"",
    "Regional growth projections:",
    "The projected recovery is weaker than the October forecast due to persistent weakness in some of the largest economies even as others see moderate growth.",
    "Policy responses observed: easing monetary policy where appropriate, using available space to calibrate fiscal adjustment, and pursuing supply-side reforms.",
    "Brazil:",
    "Argentina:",
    "Colombia:",
    "Chile:",
    "Peru:",
    "Ecuador:",
    "Venezuela:",
    "Mexico:",
    "Central America and the Dominican Republic:",
    "Caribbean:",
    "Exchange rate policy:",
    "Financial sector and corporate balance sheets:",
    "Fiscal policy:",
    "Structural reforms:",
    "**Navegar as contracorrentes mundiais: Perspectivas mais recentes para a América Latina e Caribe**",
    "[global landscape has changed](https://blogs.imf.org/2017/01/16/a-shifting-global-economic-landscape-update-to-the-world-economic-outlook/)"
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