CONTENT External context and its impact in the region Macroeconomic - - PowerPoint PPT Presentation

CONTENT

• External context and its impact in the region
• Macroeconomic trends
• Space for policies
• Prospects and challenges

External context and its impact in the region

The external context and its impact in the region

• Slow and heterogeneous recuperation of the global

economy:

–Modest recuperation in the United States of 2.1% with a greater impact on Mexico, Central America and the Caribbean –Growth in the Eurozone continues to be low at 0.8%, lack of competitiveness, high levels of unemployment with a negative impact on global trade –Slowing growth in China at 7.3% with an impact on natural resources exporting countries

• End of QE in the United States, though liquidity in

international financial markets holds steady, reflecting expansionary monetary policies in other developed

• economies. Changes in the composition of external

portfolios have led to exchange rate volatility

In 2014, global economic growth registered a slight recovery

ECONOMIC GROWTH BY REGIONS AND SELECTED COUNTRIES, 2007-2010 TO 2014

(In percentages)

Source: UN DESA. Global Economic Outlook. October 2014.

a Projections.

Heterogeneous growth in developed countries and deceleration in developing countries in particular in China

1.8 0.3 0.3 0.0 0.2 5.9 10.8 2.8 1.5 1.8

• 0.6

1.6 5.9 9.3 2.3 1.3 2.8 1.4

• 0.7

4.7 7.7 2.4 1.2 2.2 1.5

• 0.5

4.7 7.7 2.6 1.6 2.1 0.8 0.8 4.4 7.3

• 2

2 4 6 8 10 12 World Developed countries United States Japan Euro area Developing Countries China 2007-2010 2011 2012 2013 2014ᵃ

Economic growth was heterogeneous during 2014 among countries

LATIN AMERICA AND THE CARIBBEAN: GDP GROWTH RATES, 2014 a

(In percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Estimations.

• 3.0
• 0.3

0.2 0.7 1.1 1.1 1.8 1.9 2.1 2.2 2.8 3.0 3.5 3.5 3.6 3.7 4.0 4.0 4.0 4.5 4.8 5.2 6.0 6.0

• 4
• 3
• 2
• 1

1 2 3 4 5 6 7 Venezuela (Bol. Rep. of) Argentina Brazil South America Latin America and the Caribbean Cuba Chile The Caribbean Mexico El Salvador Peru Honduras Uruguay Haiti Costa Rica Central America Ecuador Guatemala Paraguay Nicaragua Colombia Bolivia (Plur. State of) Dominican Republic Panamá

• 1.4

0.0 1.1 1.2 1.3 1.8 1.9 2.2 2.3 2.7 2.8 3.4 3.5 4.5

• 2
• 1

1 2 3 4 5 Saint Lucia Barbados Dominica Jamaica Grenada Trinidad and Tobago The Caribbean Saint Vincent and the Grenadines Bahamas Antigua and Barbuda Saint Kitts and Nevis Belize Suriname Guyana

Macroeconomic trends

As of the third and fourth quarter a change in the deceleration trend was observed

LATIN AMERICA AND THE CARIBBEAN: QUARTERLY GROSS DOMESTIC PRODUCT, YEAR-ON-YEAR PERCENTAGE CHANGE, 2007-2014

(In percentages based on constant 2010 dollars)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

• 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 IV I II III IV I II III IV I II III IV 2007 2008 2009 2010 2011 2012 2013 2014 Latin America and the Caribbean Estimation IV qtr 2014

The participation of investment in domestic demand has fallen steadily since 2011…

LATIN AMERICA: EVOLUTION OF GDP AND THE CONTRIBUTION OF THE COMPONENTS OF AGREGATE DEMAND, 2002-2014a

(In percentages based on constant 2010 dollars)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Estimations.

1.3 0.5 0.4

• 0.1
• 1.0
• 1.3
• 1.5

0.5

• 1.5
• 1.4
• 1.1
• 0.1

0.8

• 1.6
• 1.3

2.3 1.4 2.1 2.3 2.1

• 2.6

3.1 1.7 0.3 0.7

• 1.1

0.8 2.7 3.4 3.3 4.3 4.8 3.4 0.9 4.6 3.9 3.4 2.2 1.4

• 4
• 2

2 4 6 8 10 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Net exports Investment Consumption GDP

…which reflects the fact that investment dynamism has been consistently decelerating and volatile

LATIN AMERICA: GROSS FIXED CAPITAL FORMATION, 2000-2014a

(In percentages based on national currency at constant prices and constant 2010 dollars)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Estimations.

• 25
• 15
• 5

5 15 25 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Latin America Central America Rest of South America Mexico Brazil

The region exhibits differences in inflation trajectories

LATIN AMERICA AND THE CARIBBEAN: 12-MONTH CHANGE IN INFLATION, 2010- 2014

(In percentages, weighted average)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Estimations.

2 4 6 8 10 12 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 2010 2011 2012 2013 2014 Latin America and the Caribbean South America Mexico and Central America The Caribbean Brazil Mexico

Despite slowing economic growth unemployment fell slightly…

LATIN AMERICA AND THE CARIBBEAN (10 COUNTRIES): PARTICIPATION, EMPLOYMENT AND URBAN UNEMPLOYMENT RATES, 2011-Q1 TO 2014-Q3 (In percentages, 1-year moving average)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

5 5.5 6 6.5 7 7.5 54 55 56 57 58 59 60 61

2011- Q1 2011- Q3 2012- Q1 2012- Q3 2013- Q1 2013- Q3 2014- Q1 2014- Q3

Unemployment rate (right axis) Employment rate (left axis) Participation rate (left axis)

… and real wages grew moderately

LATIN AMERICA (SELECTED COUNTRIES): FORMAL SECTOR REAL WAGES, 2012 – FIRST TO THIRD QUARTER OF 2014

(Year-over percentage change)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

• 0.5

0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 BRA CHI COL CRI MEX NIC PAN PRY URY 2012 2013 Q1-Q3 2014

The current account deficit registered a slight improvement

LATIN AMERICA: CURRENT ACCOUNT STRUCTURE, 2006-2014a

(In percentages of GDP)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Projections.

3.1 2.0 0.9 1.4 1.1 1.3 0.8 0.3 0.3

• 0.7
• 0.8
• 0.8
• 0.9
• 1.1
• 1.2
• 1.3
• 1.4
• 1.3
• 3.0
• 2.7
• 2.5
• 2.5
• 2.4
• 2.5
• 2.4
• 2.6
• 2.4

2.0 1.7 1.5 1.4 1.2 1.1 1.0 1.0 1.0 1.4 0.2

• 0.9
• 0.6
• 1.3
• 1.4
• 1.8
• 2.6
• 2.3
• 4
• 3
• 2
• 1

1 2 3 4 5 6 2006 2007 2008 2009 2010 2011 2012 2013 2014 Goods balance Services balance Income balance Current transfers balance Current account balance

A greater decline in imports on average as compared to exports contributed to stabilizing the current account balance

LATIN AMERICA (COUNTRY GROUPINGS): EXPORTS AND IMPORTS, 2014a

(Annualized percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Projections.

Exports Imports

• 1.0
• 5.1
• 0.5
• 3.8

4.4

• 8
• 6
• 4
• 2

2 4 6 8 Latin America South America Central America Brazil Mexico Volume Price Value

• 0.7
• 4.2
• 0.4
• 3.9

5.1

• 8
• 6
• 4
• 2

2 4 6 8

Volume Price Value

• 15
• 10
• 5

5 10 15 The Caribbean (excl Trinidad y Tobago) Exporters of minerals and metalsᵈ Exporters of agro-industrial productsᶜ Exporters of hydrocarbonsᵇ Central America, Haiti and Dominican Republic Latin America and the Caribbean Brazil Mexico 2011 2012 2013 2014ᵃ

Falling commodities prices led to a decline in the terms of trade for the region on average

LATIN AMERICA: ESTIMATED PERCENTAGE CHANGE IN THE TERMS OF TRADE, 2011-2014a

(In percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Projections. b Bolivia (Plur. State of), Colombia, Ecuador, Trinidad and Tobago and Venezuela (Bol. Rep. of). c Argentina, Paraguay and Uruguay. d Chile

and Peru.

0, 1

Continued access to external financial markets, but a changed composition of inflows increases latent vulnerability

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

LATIN AMERICA (17 COUNTRIES): FINANCIAL ACCOUNT COMPONENTS AND EMBI+ , 2010-2014 (In percentages of GDP and basis points)

50 100 150 200 250 300 350 400 450 500

• 6
• 4
• 2

2 4 6 I II III IV I II III IV I II III IV I II III IV I II 2010 2011 2012 2013 2014 Percentage of GDP Capital account balance Net foreign direct investment Net portfolio investment Net other investment liabilities Errors and omissions Reserves and related items Basis points

Space for policies

Budget deficits rose slightly on average in Latin America and fell in the Caribbean

LATIN AMERICA (19 COUNTRIES) AND THE CARIBBEAN (13 COUNTRIES): CENTRAL GOVERNMENT FISCAL INDICATORSa, 2005-2014

(In percentages of GDP)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Simple averages. Data for 2014 are estimates.

Latin America The Caribbean Overall balance (right axis) Total revenue (left axis) Total expenditure (left axis) Primary balance (right axis)

• 1.0

0.1 0.3

• 0.4
• 2.8
• 1.8
• 1.6
• 2.0
• 2.4
• 2.7

1.4 2.3 2.2 1.2

• 1.0
• 0.2

0.1

• 0.3
• 0.6
• 0.8
• 6
• 4
• 2

2 4 6 8 10 12 10 12 14 16 18 20 22 24 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

• 1.1
• 3.0
• 1.9
• 2.4
• 4.5
• 3.6
• 3.6
• 3.3
• 4.1
• 3.9

2.9 0.8 1.4 1.0

• 0.2

0.0

• 0.2

0.1

• 0.8
• 0.7
• 5
• 4
• 3
• 2
• 1

1 2 3 4 23 24 25 26 27 28 29 30 31 32 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

The drop in non-tax fiscal revenues was compensated by an increase in tax revenues, and public expenditure remained stable

LATIN AMERICA AND THE CARIBBEAN (SUBREGIONS): CENTRAL GOVERNMENT FISCAL REVENUES AND TOTAL EXPENDITURES, 2013-2014

(In percentages of GDP)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a The figures for Mexico correspond to the federal public sector.

Latin America (19 countries) The Caribbean (13 countries) Latin America (19 countries) The Caribbean (13 countries)

Public debt levels remain stable, though levels and composition differ among regions

LATIN AMERICA (19 COUNTRIES) AND THE CARIBBEAN (13 COUNTRIES): INTERNAL AND EXTERNAL PUBLIC DEBT, 2005-2014

(In percentages of GDP)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

Latin America The Caribbean

Fiscal policies play a limited role for improving the income distribution in Latin America

LATIN AMERICA AND OECD: MARKET INCOME AND DISPOSABLE INCOME INEQUALITIES – total population (Gini indices – Around 2011) Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of household surveys for Latin America and OECDSTAT. 0.50 0.47 0.49 0.47 0.30 0.30 0.25 0.30 0.35 0.40 0.45 0.50 0.55 0.60 Market income Disposable income in cash

Fiscal reforms have been aimed at taxing capital income

• Argentina (2013)
• Chile (2014)
• Colombia (2012)
• Ecuador (2007)
• El Salvador (2009, 2011)
• Guatemala (2009, 2011)
• Honduras (2010, 2011)
• Mexico (2013)
• Nicaragua (2012)
• Panama (2009-2012)
• Paraguay (2012)
• Peru (2007, 2012)
• Dominican Rep. (2012)
• Uruguay (2007, 2012-

2013)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official information.

Monetary policy was generally counter-cyclical, prioritizing growth

LATIN AMERICA (COUNTRY GROUPINGS): LENDING RATES, 2010-2014 (Annualized percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Costa Rica, Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, Nicaragua and Panama. b Argentina, Bolivia, Ecuador,

Paraguay and Uruguay. c Brazil, Chile, Colombia, Mexico and Peru.

Average lending rates decreased

15.5 16 16.5 17 17.5 18 18.5 19 19.5 8 9 10 11 12 13 14 15 16 17 2010-JAN MAR MAY JUL SEP NOV 2011-JAN MAR MAY JUL SEP NOV 2012-JAN MAR MAY JUL SEP NOV 2013-JAN MAR MAY JUL SEP NOV 2014-FEB APR JUN AUG Central America ᵃ The Caribbean (English speaking) Other South American countriesᵇ Inflation targeting countriesᶜ (right axis)

In general domestic credit growth has decelerated

LATIN AMERICA AND THE CARIBBEAN (COUNTRY GROUPINGS): DOMESTIC CREDIT TO THE PRIVATE SECTOR, FIRST QUARTER OF 2012 TO THIRD QUARTER OF 2014

(Year-on-year percentage change)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures. a Costa Rica, Dominican Rep., Guatemala, Haiti, Honduras and Nicaragua. b Ecuador, El Salvador, y Panama. c Brazil, Chile, Colombia, Mexico and Peru. d Argentina, Bolivia, Paraguay and Uruguay.

5 10 15 20 25 30 I 2012 II 2012 III 2012 IV 2012 I 2013 II 2013 III 2013 IV 2013 I 2014 II2014 III2014 Central Americaᵃ The Caribbean (English speaking) Dollarized countriesᵇ Countries with inflation targetingᶜ Other South American countriesᵈ

During 2014 the currencies of the region accentuated volatility and registered a nominal depreciation

SELECTED COUNTRIES: NOMINAL EXCHANGE RATES, 2011-2014

(Index of January of 2008=100)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

80 90 100 110 120 130 140 150 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Brazil Chile Colombia Mexico Peru

Despite being employed to fight exchange rate volatility, international reserves increased slightly

LATIN AMERICA AND THE CARIBBEAN: GROSS INTERNATIONAL RESERVES

(Billions of dollars and percentages of GDP)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

2 4 6 8 10 12 14 16 100 200 300 400 500 600 700 800 900 1,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014ᵃ Gross international reserves (left axis) In percentages of GDP (right axis)

Billions of dollars Percentage of GDP

Prospects and challenges

Global growth trends are expected to continue through 2015

ECONOMIC GROWTH BY REGIONS AND SELECTED COUNTRIES, 2014-2015

(In percentages)

Source: UN DESA. Global Economic Outlook. October 2014.

a Projections.

2.6 1.6 2.1 0.8 0.8 4.4 7.3 3.1 2.1 2.8 1.2 1.4 4.8 7.0

1 2 3 4 5 6 7 8 World Developed countries United States Japan Euro area Developing Countries China 2014ᵃ 2015ᵃ

A moderate recovery in regional growth is projected for 2015

LATIN AMERICA AND THE CARIBBEAN: GDP GROWTH RATES, 2015a

(In percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Projections.

• 1.0

1.0 1.3 1.8 2.2 2.2 2.5 3.0 3.0 3.0 3.2 3.2 3.5 3.5 3.8 4.0 4.0 4.1 4.3 5.0 5.0 5.0 5.5 7.0

• 2
• 1

1 2 3 4 5 6 7 8

Venezuela Argentina Brazil South America Latin America and the Caribbean The Caribbean El Salvador Cuba Honduras Chile Mexico Costa Rica Uruguay Haiti Ecuador Guatemala Paraguay Central America Colombia Nicaragua Dominican Republic Peru Bolivia Panama

0.5 1.2 1.3 1.6 1.7 1.9 2.1 2.2 2.4 2.5 2.8 3.6 3.9 4.2 1 2 3 4 5

Saint Lucia Barbados Dominica Jamaica Grenada Trinidad and Tobago Belize The Caribbean Saint Vincent and the Grenadines Antigua and Barbuda Bahamas Suriname Saint Kitts and Nevis Guyana

Reverting economic deceleration and invigorating growth in a complex external environment

• Reactivate domestic demand with a focus on

investment growth

• Enhance productivity and competitiveness
• Progress in the diversification of the productive

structure and of the export basket This requires:

• Expanding counter-cyclical macroeconomic policies
• Enhancing regional integration

Expanding the counter-cyclical macroeconomic architecture, incorporating the region’s investment and infrastructure needs

• Cyclical volatility needs to be smoothed, in terms of both

economic growth and investment.

– The region has improved in the implementation and use of instruments for smoothing the economic cycle, through savings- and stabilization funds as well as monetary and exchange-rate instruments. – More progress is required in the design of instruments for smoothing the fluctuations of finance and investment over the different phases

• f the economic cycle.

– Macroprudential regulation is an important instrument in this counter-cyclical and investment-friendly architecture, by introducing regulations to avoid excessive consumption growth and to stimulate investment in the productive sector.

Strengthening regional integration as a source of:

• Increased aggregate demand:

– Trade integration

• Increased productivity and competitiveness:

– Productive integration and value chains – Infrastructure integration

• Increased capacity to withstand external shocks:

– Regional reserve funds – Productive and export financing