Entries for 'Latin America'
January 26, 2021
Ecuador’s IMF program entails steady fiscal adjustment. The government has kept austerity, redirecting spending to cope with COVID-19. However, implementation risk is on the rise ahead of the 2021 presidential election. Policy slippage could result in a challenging funding situation.
December 18, 2020
COVID-19 has exacerbated regional labor market vulnerability, and lockdowns have worsened the deterioration in employment conditions. Uneven losses across formal and informal sectors suggest declining job quality. Slow post-lockdown job growth raises fears of a jobless recovery in some countries.
December 8, 2020
Activity has bounced back strongly following a sharp contraction in 2020Q2. The impact of political turmoil on the economy has been modest, and nonresident flows into government debt have remained stable. Uncertainty ahead of the April 2021 general election is the main risk to the growth outlook.
November 24, 2020
Foreign reserves have recovered faster under COVID-19 than during the GFC. Import compression, dollar bond issuance, and XR adjustment have helped several countries strengthen their positions. Despite demanding funding needs in 2021, robust external liquidity should help avoid market dislocations.
November 2, 2020
We project a real GDP contraction of 7.5% in 2020 and a modest rebound in 2021. Tourism remains depressed, but remittances have surpassed pre-COVID-19 levels. SLV, JAM, and PAN are set to endure the steepest recessions, while GTM should contract the least due to its stable macroeconomic framework.
October 21, 2020
We forecast a modest activity upturn in 2021 from a deep recession this year. Mexico, Argentina, and Peru are set to suffer the largest output contractions regionwide. A weak global backdrop, pre-existing challenges, and eroded policy buffers could complicate the recovery.
October 8, 2020
The BoP correction has been remarkable amid activity collapse and exchange rate flexibility.
Current account adjustment helped protect reserves desp...
September 2, 2020
The new IMF program improves the funding outlook. An external financing gap next year cannot be ruled out. High borrowing needs would require tapping additional sources. Limited REER adjustment could exacerbate external vulnerability. The February 2021 election adds program implementation risk.
August 19, 2020
COVID-19 has exacerbated El Salvador’s external financing needs. Pressure has intensified amid a widening fiscal deficit, and financing options are narrow. With limited flexibility to unwind stimulus after COVID-19, an IMF program would help ease medium-term financing concerns.
July 30, 2020
COVID-19 has exacerbated Costa Rica’s external and fiscal imbalances. We project a widening of the current account deficit driven by the services sector. Further IMF funding would be needed to cover a potential external financing gap. External risk remains tied to substantial fiscal vulnerability.
July 13, 2020
We analyze the impact of COVID-19 via early activity indicators. Tourism and remittances receipts are key vulnerability drivers. Despite shrinking services surpluses, falling goods imports have kept external pressure contained. Monetary policy has eased markedly, while fiscal space is more limited.
July 1, 2020
Exchange rate flexibility has eased the adjustment to COVID-19 in most large countries. However, “fear of floating” is still high across Central America and the Caribbean. While local market financing is increasing, countries have largely had to borrow in hard currency to help withstand the shock.
June 24, 2020
EM are experiencing an unprecedented and synchronized growth slowdown in ‘20. Restrictions remain in place in many countries, as the health crisis is far from over. The fiscal response has been uneven in EM, with some running out of policy space. Most EM central banks cut rates aggressively, and QE has become part of the toolkit. Asset price recovery and a modest return of capital flows should provide support.
June 18, 2020
Unprecedented fiscal measures have been enacted to withstand COVID-19. However, stimulus in Colombia appears limited by regional standards. Suspension of the fiscal rule in 2020-21 will enable additional income support. Permanent fiscal deterioration amid a likely frail recovery is a major risk.
June 8, 2020
COVID-19 has widened fiscal deficits and spurred needs for additional funding. As a result, QE-type measures have gained impetus amid disinflationary pressure. While countries with sounder institutions can take more aggressive steps, we expect QE to remain modest barring a resurgence of instability.
May 7, 2020
COVID-19 has increased external funding challenges despite moderate borrowing needs. Notwithstanding oil price relief, collapsing remittances and tourism will weigh on current account receipts. While some countries have tapped global debt markets, uncertainty over financing sources remains.
April 13, 2020
COVID-19 has affected Latin America through multiple channels. Pre-existing challenges and increased exposure put the region in a difficult position. We project a deep recession this year amid a sudden stop in capital flows and limited policy space.
March 24, 2020
We see the global economy in recession this year, as low oil and financial stress add to the Covid shock. The shock hits EM after years of already subpar growth. We project recessions everywhere in Latin America, and the lowest EM Asia growth since the 1997-98 crisis.
February 11, 2020
Despite some fiscal consolidation, public finances are fragile. If fully implemented, the fiscal rule would imply a sizable adjustment. Nonetheless, gross public financing needs will likely remain high this year and next.
January 29, 2020
South Africa and Mexico face significant fiscal risks from struggling SOEs. Both Eskom and Pemex are receiving sizable support from governments. Such risks prompt SARB and BANXICO to keep real rates above EM peers. A downgrade of sovereign credit ratings could lead to large portfolio outflows. However, risks to debt sustainability are higher in South Africa than Mexico.