Average gross domestic product (GDP) in Latin America has surprised analysts on the upside, although it is expected to slow later this year and next, according to the Bank of Spain in its report on the behavior of the Latin American economy in the first half of 2023. “Economic activity in Latin America continues to be more dynamic than expected a few months ago, despite the tightening of monetary policy, the withdrawal of some fiscal stimulus and the loss of purchasing power due to…”continuation of high inflation,” write specialists from the Spanish regulator in a study published on Tuesday.
The growth rate in the first quarter of the year was 1.2%, compared to the 0% expected by analysts at the beginning of 2023. However, not all economies have grown, the report emphasizes. Brazil’s growth, fueled by the contribution of the agricultural sector, is notable, while Peru’s economy shrank, “temporarily weighed down by disruptions related to social protests,” the report said.
According to the Bank of Spain, high inflation has caused Latin Americans to lose purchasing power, but the impact has been mitigated by strengthening jobs. The workforce in March was 5% above pre-pandemic numbers. Meanwhile, the unemployment rate continued to fall, reaching 6.8% in the same month, compared to 8.5% in March 2019.
“Latin America is facing a slightly less favorable international environment, with slightly slower global growth and falling energy and food commodity prices – although still above historical averages – affecting several of the region’s economies.” net exporters,” the study says. “Furthermore, this outlook comes with a high degree of uncertainty and a discouraging medium-term outlook given the potential growth rates calculated for the region by various international institutions,” the experts add.
Analysts polled by the Bank of Spain forecast that economic activity will decrease year-on-year by the end of 2023, namely by an average of 1.5%, compared to the 3.6% in 2022. This growth is similar to the 1 For Eastern Europe, the Particularly affected by the war in Ukraine, 0.5% is expected, and higher than in advanced economies such as the United States and the Eurozone. The emerging Asian countries will grow more strongly this year at 4.4%.
In the region, inflation has continued to moderate in almost all countries. On average, it reached 6% per year in May, 4.2 percentage points below the peak reached in June 2022. “Likewise, in the coming quarters, the process of gradually reducing inflation is expected to continue until the end of 2024.” the target intervals of the region’s main central banks with inflation targets. In addition, long-term inflation expectations remain anchored in inflation targets and are less related to past inflation,” the bank explains.
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