Thursday, July 25, 2013

Latin American GDP will grow by 3% in 2013 – ECLAC's midterm forecast

Latin America is likely to grow by 3% in 2013 (the same rate as in 2012) according to the 24 July 2013 report of the Santiago-based UN Economic Commission for Latin America and Caribbean ( ECLAC).  The report predicts above four percent growth in 2014.
The South American sub region is expected to grow by 3.1% in 2013 ( up from 2.5% in 2012) and  Central America by 4% ( down from 5% in 2012). 
Growth projections for the major countries in 2013 are: Brazil – 2.5% ( better than the 0.9% in 2012), Mexico-2.8% ( down from 3.9% in 2012), Argentina-3.5% ( up from 1.9% in 2012), Colombia –4% ( no change from 2012), Peru –5.9% ( down from 6.5% in 2012), Venezuela- 1% ( from 5.6% in 2012), Chile-4.6% ( 5.6% in 2012). 
The highest growth in the region will be 12.5% in Paraguay  which was the only country in the region which suffered a negative growth of 1.6% in 2012. This is not surprising since Paraguay is known for such ups and downs. Panama will have the second highest growth of 7.5%.
The region's growth rate of 3% looks modest but is not at all bad given the external environment of GDP contraction in the Eurozone successively in the last two years and the lower growth in the rest of the world. 
The primary driver of growth during 2013 continued to be consumption which has been helped by expanding credit, improving labour market conditions and increase in wages. 
The macroeconomic fundamentals continue to be healthy and strong with the following indicators:
-In May 2013, the cumulative 12-month inflation for the region stood at 6%, compared with 5.5% in December 2012 and 5.8% in May 2012.  Venezuela and Argentina were the exceptions with  double digit inflation figures.
- Unemployment stood at 6.7% in the first quarter of 2013.
-  Foreign Direct Investment in Latin America in 2012 was 122.86 billion dollars, the highest in the last eight years.
-Total Gross External Debt of the region in 2012 was 1.18 trillion dollars. The ratio of gross external debt to GDP stood at 20 % in 2012 coming down from 34.8% in 2004.A number of countries have decreased their public debt in recent years and have access to funding for their deficits.
- The International reserves of Latin America and Caribbean has steadily risen from 226 billion dollars in 2004 to 826 billion in May 2013. 
-The overall current account deficit for Latin America is likely to be 2% of GDP in 2013. 
The region faces slowdown in exports due to the reduced external demand and the drop in the prices of some of the region’s export commodities  such as minerals, metals, oil and some food items.  Sugar and coffee prices have gone down while wheat and maize have increased in the first half this year. Although the prices of oil seeds had increased modestly in the first half of 2013, they are expected to go down due to the bumper harvest expected. While some experts say that the super cycle of high commodity prices are over, others expect the prices to remain relatively high in the coming years. Exports of the region are expected to increase by 4% and imports by 6% in value terms in 2013.
The total GDP of the region reached 5.64 trillion dollars in 2012. Brazil and Mexico are in the trillion dollar league with 2.25 trillion and 1.17 trillion dollars respectively. Argentina is the third largest economy with 477 billion dollars followed by Venezuela with 381 billion, Colombia 370 billion, Chile 268 bn and Peru 204 bn. The remaining 13 countries of the region have double digit billions as GDPs except for Haiti whose GDP was in single digit (7.8 billion).

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