Latam Macro Monthly

Global Economy
Global growth on track, trade risk to fade
Global growth has kept up a good pace, supported by easy financial conditions and fiscal policies. U.S.-China trade-war risk remains limited, and will likely dissipate in the next couple of months.
When idiosyncratic factors matter
The recent evolution of LatAm currencies has been driven by idiosyncratic factors. Economies are growing stronger, but the recovery is bumpy.

Higher uncertainties
We maintained our GDP growth forecasts at 3.0% for 2018 and 3.7% for 2019. But the balance of risks is tilted toward disappointment, amidst higher uncertainties for the political and macroeconomic scenario, both internal and external.

Central bank faces tough choices
The central bank is keeping the reference rate unchanged but indicated a rate hike is on the table. We think the odds of a hike are significant given the fast depletion of already-low reserves and uncomfortable inflation figures.

A NAFTA deal within reach?
We continue to expect that a successful renegotiation of NAFTA will be announced in 2Q18. Notably, the renegotiation talks seem to have gained significant momentum recently.

Looking at global factors
We expect GDP growth of 3.6% this year, more than doubling the 1.5% posted last year. Risks to our forecast come from the potential escalation of global trade tensions.

Political uncertainty eases
Pedro Pablo Kuczynski (PPK) announced his voluntary resignation amid lack of support in Congress. Markets welcomed the new government, led by PPK’s Vice-President Martín Vizcarra because it implies continuity for market-friendly policies and less confrontation with Congress.

Faster disinflation paves the way for additional easing  
Faster-than-expected disinflation in March, together with the still weak activity, strengthens our base-case scenario that the central bank will resume rate cuts this month (to 4.25%).


Fuente: Itaú

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