America and the Caribbean The global economy saw widespread growth - - PowerPoint PPT Presentation

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America and the Caribbean The global economy saw widespread growth - - PowerPoint PPT Presentation

Nov 22, 2022 41 likes •353 views

A slightly more favourable external context for Latin America and the Caribbean The global economy saw widespread growth in 2017 (2.9%), and will remain strong in 2018 (3%) Emerging economies are the engines of growth (4.5% in 2017 and

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A slightly more favourable external context for Latin America and the Caribbean

  • The global economy saw widespread growth in 2017

(2.9%), and will remain strong in 2018 (3%)

  • Emerging economies are the engines of growth (4.5% in

2017 and 4.8% in 2018)

  • Commodity prices continue their upward trend
  • The weakest performing area of the global economy is

trade, which is picking up, but growth remains at historically low rates: 3.6% in 2017 and 3.2% in 2018

  • Volatility has eased
  • International interest rates remain low
  • Emerging economies have reduced their country risk
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Global risks

  • Escalating geopolitical tensions
  • Return of protectionism
  • Low dynamism in global productivity and investment
  • High debt levels in the private sector in a context of low

growth and inflation could result in an increase in debt in real terms

  • Withdrawal of monetary stimulus in developed

economies and normalizing interest rates will affect financial flows into emerging economies

  • Impact of tax reform, financial and environmental

deregulation in the United States on investments and levels of international financial flows

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SELECTED REGIONS AND COUNTRIES: GDP GROWTH, 2016 – 2018a (Percentages)

Source: ECLAC, on the basis of United Nations, World Economic Situation and Prospects, 2018, forthcoming; International Monetary Fund (IMF), World Economic Outlook (WEO), October 2017; Capital Economics, Global Economic Outlook, October 2017; and Consensus Economics.

a Figures for 2017 and 2018 are projections.

The global economy shows signs of a synchronized recovery

2.4 1.6 1.5 1.0 1.8 1.8 4.0 6.7 7.1 2.9 2.1 2.2 1.6 1.5 2.2 4.5 6.8 6.7 3.0 2.0 2.4 1.2 1.4 2.1 4.8 6.5 7.2 1 2 3 4 5 6 7 8 World Developed economies United States Japan United Kingdom Eurozone Emerging market and developing economies China India 2016 2017ᵃ 2018ᵃ

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Growth in world trade accelerated but remains at historically low levels: 3.6% (WTO) Cyclical factors that explained the meager growth of trade in recent years are being

  • reversed. But

uncertainty persists related to more structural factors.

Source: ECLAC, on the basis of figures issued by the Netherlands Bureau of Economic Policy Analysis (CPB).

The global economy is improving in a context of weak international trade

YEAR-ON-YEAR VARIATION IN WORLD TRADE, THREE-MONTH ROLLING AVERAGES, 2003 – 2017 (Percentages, on the basis of a seasonally-adjusted index)

  • 20
  • 15
  • 10
  • 5

5 10 15 20 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17

Jan 2003 - Jun 2007 8% Jul 2011 - Dec 2015 2%

2016 1.4% Forecast 2017 3.6% Forecast 2018 3.2%

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10 20 30 40 50 60 70 May-06 Nov-06 May-07 Nov-07 May-08 Nov-08 May-09 Nov-09 May-10 Nov-10 May-11 Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 May-16 Nov-16 May-17 VIX Index EURO STOXX V2X Index Emerging Markets VXEEM Index IMPLIED MARKET VOLATILITY INDICES, MAY 2006 – OCTOBER 2017

Source: ECLAC, on the basis of Bloomberg. Note: VIX is prepared by the Chicago Board Options Exchange (CBOE) from S&P 500 call and put option prices, and measures expected volatility over the next 30 days. Following the same logic, the CBOE also produces the VXEEM index, which measures volatility in emerging markets, while Deutsche Börse and Goldman Sachs produce the V2X index, which measures eurozone volatility.

Improved global growth coincides with a decline in financial volatility

Global financial volatility began to ease in 2015, reflecting increasing confidence among investors and financial institutions

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SLIDE 7

The improvement in real and financial conditions is reflected in higher liquidity flows globally and into emerging economies

VARIATION IN GLOBAL FLOWS OF LIQUIDITY INTO LATIN AMERICA AND PORTFOLIO INVESTMENT FLOWS INTO EMERGING MARKETS, JUNE 2014 – JUNE 2017

Source: ECLAC, on the basis of Bloomberg and the inflation report of the Central Reserve Bank of Peru (September 2017) and on the basis of figures provided by the Bank for International Settlements (BIS), 2017. Note: Portfolio investment flows are cumulative for 12 months. Liquidity includes total credit granted by banks in the United States, Europe and Japan, and debt issues on international markets by the same group of countries.

  • 2

2 4 6 8 10 12

  • 50

50 100 150 200 250 300 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Portfolio flows (Billions of US$) (left axis) Rate of variation

  • f global

liquidity Rate of variation

  • f global

liquidity towards LAC

Percentage Billions of dollars

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Economic activity and macroeconomic variables in Latin America and the Caribbean

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  • 2%
  • 1%

0% 1% 2% 3% 4% 5% I II III IV I II III IV I II III IV I II III IV I II III 2013 2014 2015 2016 2017

The slow recovery of economic growth in Latin America continues

Since the first quarter of 2016, GDP has been trending upward in the region, reaching a three-year peak in the third quarter of 2017

LATIN AMERICA: YEAR-ON-YEAR CHANGE IN QUARTERLY GDP, FIRST QUARTER OF 2013 – THIRD QUARTER OF 2017 (Percentages on the basis of dollars at constant 2010 prices)

Source: ECLAC, on the basis of official figures.

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  • 6
  • 4
  • 2

2 4 6 8 I II III IV I II III IV I II III IV I II III IV I II III 2013 2014 2015 2016 2017 General government consumption Private consumption Gross fixed capital formation Exports of goods and services Imports of goods and services Inventories GDP

Economic growth was spurred by an upturn in private consumption and exports in 2017

LATIN AMERICA: GDP GROWTH RATES AND CONTRIBUTION OF EXPENDITURE COMPONENTS TO GROWTH, FIRST QUARTER OF 2013 – THIRD QUARTER OF 2017 (Percentages)

Source: ECLAC, on the basis of official figures.

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LATIN AMERICA AND THE CARIBBEAN: OVERALL AND PRIMARY DEFICIT AND INTEREST PAYMENTS, 2015 – 2017 (Percentages of GDP )

Source: ECLAC, on the basis of official figures.

The low contribution of public spending reflected in a reduction in the primary deficit

  • 0.9
  • 1.0
  • 0.8
  • 0.5
  • 0.2
  • 0.2
  • 1.4
  • 1.9
  • 1.5

0.8 1.2 1.2

  • 2.9
  • 3.1
  • 3.1
  • 2.4
  • 2.1
  • 2.4
  • 3.6
  • 4.2
  • 3.9
  • 2.5
  • 2.2
  • 2.3
  • 5
  • 4
  • 3
  • 2
  • 1

1 2 2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017 Latin America (17 countries) Central America, Dominican Rep., Haiti and Mexico South America (8 countries) The Caribbean (12 countries) Primary balance Interest payments (inverted sign) Overall balance

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The consolidation of the recovery is also evident in the evolution of investment

LATIN AMERICA: QUARTERLY YEAR-ON-YEAR CHANGE IN GROSS FIXED CAPITAL FORMATION, FIRST QUARTER 2014 – THIRD QUARTER 2017 (Percentages, weighted average)

Source: ECLAC, on the basis of official figures.

  • 15
  • 10
  • 5

5 10 I II III IV I II III IV I II III IV I II III 2014 2015 2016 2017 Latin America South America Mexico and Central America

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LATIN AMERICA AND THE CARIBBEAN: CONSUMER PRICE INDEX (CPI), WEIGHTED AVERAGE 12-MONTH RATES OF VARIATION, JANUARY 2014 – OCTOBER 2017 (Base year 2005 = 100)

Source: ECLAC, on the basis of official figures.

Improved growth coincides with lower inflation for the majority of the region

5.3 2 4 6 8 10 12 Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct 2014 2015 2016 2017

Latin America and the Caribbean excl Venezuela (Bol. Rep. of) South America excl Venezuela (Bol. Rep. of) Central America and Mexico The Caribbean

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In line with improveming economic growth, the unemployment rate is expected to start decreasing marginally in 2018

  • Between 2016 and

2017 the unemployment rate rose from 8.9% to 9.4%, as the participation rate rose and the employment rate stagnated.

  • The unemployment

rate should drop to 9.2% in 2018 as employment rises

  • n the back of

higher aggregate demand.

LATIN AMERICA AND THE CARIBBEAN (WEIGHTED AVERAGE OF 11 COUNTRIES): PARTICIPATION, EMPLOYMENT AND UNEMPLOYMENT RATES, 2012-2018 (Percentages)

Source: ECLAC, on the basis of official figures. Note: Includes Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, Jamaica, Mexico, Paraguay, Peru and Uruguay. Some estimates based on incomplete data are included.

a Preliminary data. b Estimates.

56.0 57.0 58.0 59.0 60.0 61.0 62.0 63.0 64.0 5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 9.0 9.5 10.0 2012 2013 2014 2015 2016 2017ᵃ 2018ᵇ Employment rate (left axis) Participation rate (left axis) Unemployment rate (right axis)

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LATIN AMERICA (SELECTED COUNTRIES AND GROUPINGS): PROJECTED CHANGES IN GOODS EXPORT AND IMPORT VOLUMES AND PRICES, 2017 (Percentages)

Source: ECLAC, on the basis of official figures.

a Chile and Peru. b Argentina, Paraguay and Uruguay. c Bolivia (Plurinational State of), Colombia, Ecuador, Trinidad and Tobago, and Venezuela

(Bolivarian Republic of).

Stronger economic growth drives up imports without destabilizing the external accounts

Imports Exports

8.0 12.0 11.8 2.7 5.0 2.8 15.2 2.8 4.5 2.6 0.6 4.0 3.3

  • 2.2
  • 5

5 10 15 20 Prices Volume 4.0 4.8 5.0 4.1 3.7 3.8 3.7 3.9 3.0 4.2 12.7 4.0 2.6

  • 1.7
  • 5

5 10 15 20 Latin America Brazil Exporters of minerals and metalsᵃ Exporters of agro-industrial productsᵇ Mexico Central America, Haiti and Dominican Rep. Exporters of hydrocarbonsᶜ Prices Volume

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LATIN AMERICA (19 COUNTRIES): BALANCE-OF-PAYMENTS CURRENT ACCOUNT BY COMPONENT, 2007–2017 (Percentages of GDP)

Source: ECLAC, on the basis of official figures.

a Figures for 2017 are projections.

The narrower current account deficit is largely attributable to the trade surplus

1.9 1.0 1.4 1.0 1.2 0.7 0.1

  • 0.2
  • 1.0

0.1 0.6

  • 0.8
  • 0.9
  • 1.0
  • 1.1
  • 1.2
  • 1.3
  • 1.4
  • 1.4
  • 1.1
  • 0.9
  • 0.9
  • 2.7
  • 2.5
  • 2.5
  • 3.1
  • 3.0
  • 2.7
  • 2.5
  • 2.6
  • 2.5
  • 2.5
  • 2.7

1.7 1.5 1.4 1.2 1.1 1.0 1.0 1.1 1.3 1.4 1.4 0.2

  • 0.9
  • 0.7
  • 2.0
  • 2.0
  • 2.3
  • 2.7
  • 3.1
  • 3.3
  • 1.9
  • 1.6
  • 6
  • 5
  • 4
  • 3
  • 2
  • 1

1 2 3 4 5 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017ᵃ Current transfers balance Income balance Services balance Goods balance Current account balance

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LATIN AMERICA (13 COUNTRIES): SOVEREIGN RISK ACCORDING TO THE EMERGING MARKET BOND INDEX GLOBAL (EMBIG), JANUARY 2012 – OCTOBER 2017 (Basis points)

Source: ECLAC, on the basis of JP Morgan Emerging Markets Bond Index Global (EMBI Global).

a Figures as at 30 September 2017.

The lower perception of risk facilitated the financing of the current account deficit with capital inflows

300 350 400 450 500 550 600 650 700 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17

  • 70

basis points

31 Dec. 2015 31 Dec. 2016 31 Oct. 2017 Argentina 438 455 361 Bolivia 250 83 204 Brazil 548 330 237 Chile 253 158 118 Colombia 317 225 183 Ecuador 1,266 647 563 Mexico 315 296 247 Panama ᵃ 214 187 125 Paraguay 338 281 196 Peru 240 170 136 Dominican Rep. ᵃ 421 407 283 Uruguay 280 244 154 Venezuela 2,807 2,168 3,171 Latin America 605 473 403

Level of EMBIG index as of:

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Greater financial inflows and lower perceived risk have helped to attenuate exchange-rate volatility

LATIN AMERICA (SELECTED COUNTRIES): YEAR-ON-YEAR VARIATION IN THE EXCHANGE RATE EXPRESSED IN ABSOLUTE TERMS (Percentages)

Source: ECLAC, on the basis of Bloomberg figures. 10 20 30 40 50 60 70 80 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 2016/2015 2017/2016 Argentina Brazil Colombia 5 10 15 20 25 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 2016/2015 2017/2016 Mexico Chile 5 10 15 20 25 30 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 2016/2015 2017/2016 Peru Paraguay 1 2 3 4 5 6 7 8 9 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 2016/2015 2017/2016 Guatemala Honduras Costa Rica

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LATIN AMERICA AND THE CARIBBEAN (SUBREGIONS): INTERNATIONAL RESERVES, 2010–2017 (Billions of dollars and percentages of GDP)

Source: ECLAC, on the basis of official figures.

In turn this led to an increase in the stock of international reserves in the region

12.0 12.5 13.0 13.5 14.0 14.5 15.0 15.5 16.0 16.5 17.0 500 550 600 650 700 750 800 850 900 950 1 000 2010 2011 2012 2013 2014 2015 2016 2017 Gross international reserves (left axis) In percentages of GDP (right axis) Percent of GDP

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Macroeconomic policies

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LATIN AMERICA (17 COUNTRIES): CONTRIBUTION BY EXPENDITURE COMPONENTS TO YEAR-ON- YEAR VARIATION IN TOTAL SPENDING OVER GDP,a 2010-2017 (Percentages)

Source: ECLAC, on the basis of official figures.

a Figures refer to central government budget. Year-on-year variation in the average for variables as a percentage of GDP for relevant countries.

Fiscal policy has focused on containing public expenditure growth to control public debt

  • 2
  • 1

1 2 3 4 5 6 2010 2011 2012 2013 2014 2015 2016 2017 Primary current expenditure Interest payments Capital expenditure Total expenditure

  • 0.8%
  • 1.4%

4.0% 2.7% 0.4% 0.5% 1.1% 0.0% Year-on-year variation of total expenditure over GDP:

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LATIN AMERICA (19 COUNTRIES): CENTRAL GOVERNMENT GROSS PUBLIC DEBT, BY SUBREGION, 2008–2017a (Percentages of GDP)

Source: ECLAC, on the basis of official figures.

a Simple averages. The 2017 figures refer to the third quarter.

In the last two years, public debt has grown at a slower pace

28.5 30.7 28.8 33.0 38.0 38.4 20 25 30 35 40 45 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 South America Central America, Dominican Rep., Haiti and Mexico Latin America (19 countries)

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74 54 48 47 47 44 44 44 39 39 38 36 36 32 31 26 24 24 21 21

10 20 30 40 50 60 70 80 90 BRA ARG HON VEN CRI URY COL SLV PAN RDO LA-19 MEX HTI BOL NIC ECU CHL GTM PER PRY 2016 2017 (3rd Qtr)

110 103 92 80 75 74 74 71 68 52 51 50 48 46

20 40 60 80 100 120 140 160 JAM BRB BEL BHS SLC GRD SVG CAR-13 AYB TYT DOM SUR SKN GUY 2016 2017 (3rd Qtr)

LATIN AMERICA AND THE CARIBBEAN: CENTRAL GOVERNMENT GROSS PUBLIC DEBT, 2016 AND 2017 (Percentages of GDP)

Source: ECLAC, on the basis of official figures. Note: Figures for Argentina refer to the first quarter and for Chile, Colombia, the Dominican Republic, Haiti, Uruguay and Venezuela (Bolivarian

  • rep. of) refer to the second quarter. For Guyana and Jamaica, the figures refer to the public sector.

Regional disparities in public debt levels predominate

Latin America The Caribbean

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Vigorous tax activism in the region has protected tax revenues during a difficult economic juncture

LATIN AMERICA (17 COUNTRIES): CENTRAL GOVERNMENT TAX REVENUES,a 2010-2017 (Percentages of GDP)

  • As a result of a significant number
  • f tax reforms, the tax take of

central governments rose 1.2 percentage points of GDP between 2010 and 2017.

  • Tax evasion remains high, limiting

the impact of these reforms. ECLAC estimates that evasion of the income tax and the value added tax cost the region some US$ 340 billion in revenue in 2015.

Source: ECLAC, on the basis of official figures.

a Simple averages.

14.4 14.8 15.2 15.2 15.3 15.6 15.6 15.6 0.1 13.5 14.0 14.5 15.0 15.5 16.0 2010 2011 2012 2013 2014 2015 2016 2017 Tax revenues for asset regularization Tax revenues (excl. regularization) 1.2 points

  • f GDP
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LATIN AMERICA (SELECTED COUNTRIES): MONETARY POLICY RATES IN COUNTRIES WHERE THEY ARE USED AS THE MAIN POLICY INSTRUMENT, JANUARY 2013–OCTOBER 2017 (Percentages)

Source: ECLAC, on the basis of official figures.

Monetary policy has maintained an expansionary stance in most countries due to lower inflation and exchange rate stability

0.0 2.5 5.0 7.5 10.0 12.5 15.0 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep 2013 2014 2015 2016 2017 Brazil Chile Colombia Peru Guatemala Honduras 5 10 15 20 25 30 0.0 2.5 5.0 7.5 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep 2013 2014 2015 2016 2017 Costa Rica Mexico Argentina (right axis)

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Outlook and challenges

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Source: ECLAC, on the basis of official figures.

a Projections.

After the contraction experienced in 2016, the GDP of Latin America and the Caribbean will grow by 1.3% in 2017

LATIN AMERICA AND THE CARIBBEAN: GDP GROWTH RATE, 2017 (In percentages)

  • 9,5
  • 8,3
  • 2,3
  • 0,7

0,1 0,5 0,8 0,8 0,9 1,0 1,2 1,2 1,3 1,3 1,3 1,5 1,5 1,8 2,1 2,2 2,4 2,5 2,5 2,5 2,8 2,9 2,9 3,0 3,2 3,3 3,5 3,9 3,9 3,9 4,0 4,5 4,9 4,9 5,3

  • 12
  • 10
  • 8
  • 6
  • 4
  • 2

2 4 6 Venezuela (Bol. Rep. of) Dominica Trinidad and Tobago Suriname THE CARIBBEAN Cuba

  • St. Vincent and the Grenadines

SOUTH AMERICA Brazil Ecuador Jamaica Bahamas Haiti LATIN AMERICA LATIN AMERICA AND THE CARIBBEAN Chile Barbados Colombia

  • St. Kitts and Nevis

Mexico El Salvador Peru Belize CENTRAL AMERICA AND MEXICO

  • St. Lucia

Guyana Argentina Uruguay Guatemala CENTRAL AMERICA Granada Honduras Costa Rica Bolivia (Plur. State of) Paraguay Antigua and Barbuda Dominican Rep. Nicaragua Panama

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SLIDE 28

Source: ECLAC, on the basis of official figures.

LATIN AMERICA AND THE CARIBBEAN: GDP GROWTH RATE, 2018 (In percentages)

In 2018, the rate of growth of GDP in Latin America and the Caribbean will be 2.2%

  • 5.5

0.5 0.7 1.0 1.3 1.3 1.5 1.5 1.5 2.0 2.0 2.0 2.2 2.2 2.2 2.4 2.4 2.5 2.5 2.6 2.7 2.8 3.0 3.2 3.5 3.5 3.5 3.6 3.6 3.8 3.9 4.0 4.0 4.1 5.0 5.1 5.5 5.8 7.6

  • 6
  • 4
  • 2

2 4 6 8 Venezuela (Bol. Rep. of) Trinidad and Tobago Suriname Cuba Jamaica Ecuador THE CARIBBEAN

  • St. Vincent and the Grenadines

Barbados Brazil SOUTH AMERICA Bahamas LATIN AMERICA Haiti LATIN AMERICA AND THE CARIBBEAN Mexico Belize Grenada El Salvador Colombia CENTRAL AMERICA AND MEXICO Chile Argentina Uruguay Peru Guatemala Guyana

  • St. Lucia

CENTRAL AMERICA

  • St. Kitts and Nevis

Honduras Paraguay Bolivia (Plur. State of) Costa Rica Nicaragua Dominican Rep. Panama Antigua and Barbuda Dominica

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SLIDE 29

Active public policies are needed to support the expansionary cycle which began with the return to growth

  • Public, especially fiscal, policies should strengthen and

foster the cyclical upswing in order to expand the production frontier and improve the long-term trajectory

  • Although there is less fiscal space, this does not imply a

lesser role for the State nor weakens the need for industrial policies or fiscal policies in the region

  • Governments should prioritize spending with the

greatest impact on growth and inequality

  • Major public spending adjustments should be avoided

to protect medium-term growth and public debt dynamics

  • Safeguard public investment
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Fiscal space can be expanded through different measures depending on each country's situation

  • Countries with low revenues can continue their tax activism
  • Reduction of tax avoidance and evasion in all countries, by

strengthening the tax administration and expanding mechanisms of international cooperation

  • Recognition of the importance of fiscal multipliers
  • Strengthen provision of public goods with high economic and social

returns: infrastructure, social protection, health and education

  • Increasing investment requires:

 Safeguarding public investment  Writing investment safeguards into existing fiscal rules  Improving public expenditure management and accountability mechanisms  Improving the articulation with sectoral policies in order to boost private investment  Promoting public-private partnerships and redesigning tax incentives for industrial polices

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