The 2017 business year will mark a turning point for Latin American economies, with an estimate growth of 1.3% for the region as a whole, compared to a 1.3% dip in 2016.
This is what emerges from BBVA Research’s 4th Quarter Latin America Outlook report. The recovery, however, will be gradual and the region will remain well below potential growth, about 3%.
BBVA Research’s report notes that external tailwinds that timidly favored Latin America, begun to dwindle in November, after the US Presidential elections, wiping out part of the gains in asset prices and exchange rates observed throughout the year.
“In recent months, global activity has started picking up, and the growth rate is accelerating slightly above the annualized 3%, with positive confidence indicators and apparent improvements in world trade,” explained Juan Ruiz, BBVA Research’s chief economist for South America.
“However, growing uncertainty over the economic policy of the new administration in the US is causing financial tension levels to strongly increase, especially in emerging economies in general and Latin America in particular,” he added.
Confidence indicators bounce back
According to BBVA Research, the confidence indicators in most countries have started recovering slightly, after remaining at depressed levels during most part of the past two or three years.
BBVA Research has reflected this turning point in the confidence indexes (and, as a result, in consumption and investment) to its growth forecasts for the region.
“We anticipate that most countries in the region should show stronger growth rates in 2017 than throughout this year. The main exception will be Mexico, where investment and activity are already bearing a significant impact of the uncertainty over US economic policies. Thus, Regional average growth will reach 1.5% in 2017 compared to -1.3% in 2016, a growth rate that is still somewhat moderate with respect to the region’s potential – 3% – but which will mark the end of the slowdown that started in 2013,” Ruiz said.
However, the performance will be uneven across the region, with Pacific Alliance countries (Chile, Colombia, Mexico and Peru) growing above average.