After a chaotic and loud election year in 2018, Latin America faces a more optimistic economic forecast for 2019. Regional growth will increase in 2,3% (except for Venezuela). Let’s take a closer look at some specific situations:
Due to the backdrop of moderating global trade, economic activity may reduce speed. However, general expansion will remain strong thanks to the stable national demand. On the other hand, household consumption growth will increase due to inflation stability and higher wages. An improvement of the tax system will reinforce foreign investment. General forecast shows a GDP increase of 3,3%.
A solid economic expansion is the general forecast for Peru in 2019, due to a robust domestic economy and a strong external sector. This positive and secure economic environment will result in several optimistic results that will support fixed investment: promising business environment, strong credit growth and increase of investor credibility among others.
Consumer spending will be supported by higher wages, moderate inflation and constant employment. One worrisome aspect can be a decrease in demand for exports because of China’s economic deceleration. GDP forecast shows an increase of 3,8% for 2019.
Starting with external issues, exports will be protected by the new USMCA (United States-Mexico-Canada Agreement) with a 2,2%. growth. Inflation will stay high for the first semester of 2019(3,8%). Investment forecast is not very optimistic due to uneasiness over the new presidency. Also, fiscal deficit will incline from 2,3% to 2,4%.
As a very positive fact, inflation is expected to close the same as in 2018: between 2,0% – 4,0%. Firm oil prices are expected as well as higher investment. On the other hand, a tense labor market will support private expenditure that will also increase business confidence.
Public debt and challenging fiscal goals seem to have a more blurred perspective, specially today that the general district attorney and vice district attorney step down from their posts. It will be challenging for the actual government to reach mid term fiscal goals because of this crisis and because of the significant moderation of the tax reform and its revenue target cut down to half. The GPD expected for Colombia is an increase of 3,2% in 2019.
This country is carrying a large debt over its shoulders, due to its high dependence on external support, so the economy may have to struggle a lot to achieve its 2019 financial goals without IMF (International monetary Fund) support.
Also because of its high debt, the government is punishing public spending and public expenditure will probably also go down as inflation increases. GPD for Ecuador will be very low: and increase of 1,0% for 2019.