Global context for 2018 Momentum of global growth remains around - PowerPoint PPT Presentation

Global context for 2018 ▪ Momentum of global growth remains around 3.3% but with significant heterogeneity between countries ▪ Trade tensions increase uncertainties ▪ After historically low levels, financial volatility began to rise at the beginning of this year, with implications for sovereign risk

Global economic growth for 2018 is forecast around 3.3% but with greater uncertainty without the synchronicity of growth in 2017 GDP GROWTH RATES, 2016 TO 2019 ab (In percentages) 8 7.5 7.3 7.1 6.9 7 6.7 6.7 6.6 6.3 6 4.8 4.8 5 4.7 4.0 4 3.3 3.2 3.2 2.8 3 2.5 2.4 2.4 2.3 2.3 2.3 2.1 2.2 1.9 1.9 1.8 1.8 2 1.7 1.6 1.5 1.5 1.4 1.1 1.0 0.9 1 0 World Developed United States Japan United Eurozone Emerging China India economies Kingdom market and developing economies 2016 2017 2018 2019 Source : Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of United Nations, World Economic Situation and Prospects, Update as of mid-2018, New York, June 2018; International Monetary Fund (IMF), July 2018, Capital Economics, June 2018; European Commission, May 2018 y European Central Bank, June 2018. a Values for 2018 and 2019 correspond to forecasts. b Values for India correspond to the fiscal year that begins in April and ends in March of the following year.

Structural slowdown of world trade post subprime crisis; in 2018 this is further impacted by trade tensions YEAR-ON-YEAR VARIATION IN GLOBAL TRADE VOLUMES, JANUARY OF 2003 TO MAY OF 2018 (In percentages) 20 15 Jan 2003 - Jun 2007 8% 10 2017 Forecast Jul 2011 - Dec 2015 4.6% 2018 2% 3.1% 5 0 2016 1.5% -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-18 Jul-18 Source : Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of Netherlands Bureau of Economic Policy Analysis (CPB), World Trade Monitor, 2018 and World Trade Organization (WTO), for forecasts of 2018.

After closing 2017 at historically low levels, financial volatility has risen sharply this year ▪ Geopolitical risks FINANCIAL MARKET VOLATILITY INDICIES, JANUARY 2016 TO JULY 2018 and growing trade tensions 45 45 Steel and aluminum Anuncio tarifas al Aumento de acero y al aluminio por tariffs announced in ▪ Increases in the Increase in tensiones 40 40 parte de EEUU USA trade tensions BREXIT BREXIT comerciales between the the interest rate EEUU con Sell-out de bolsas Sell-out de bolsas 35 35 USA and China Elecciones Elections China of the FED en EEUU in the USA Elecciones Elections Tensiones Tensions 30 30 en Francia in France between USA EEUU con Incertidumbre Political ▪ Generalized política en Corea del and North uncertainty in Italia Italy 25 25 Norte Korea depreciations 20 20 with respect to 15 15 the dollar ▪ Rising uncertainty 10 10 Índice VIX VIX Index EEUU impone nuevos USA imposes new is accompanied by 5 5 Índice V2X (EURO STOXX) EURO STOXX V2X Index aranceles a China con tariffs on China with Índice VXEEM (Mercados Emergentes) Emerging Markets VXEEM Index represalias inmediatas immediate retaliation greater sensitivity 0 0 1-sep-16 1-sep-17 1-ene-16 Jan-16 1-feb-16 Feb-16 1-mar-16 Mar-16 1-abr-16 Apr-16 1-may-16 May-16 1-jun-16 Jun-16 1-jul-16 Jul-16 1-ago-16 Aug-16 Sep-16 1-oct-16 Oct-16 1-nov-16 Nov-16 1-dic-16 Dec-16 1-ene-17 Jan-17 1-feb-17 Feb-17 1-mar-17 Mar-17 1-abr-17 Apr-17 1-may-17 May-17 1-jun-17 Jun-17 1-jul-17 Jul-17 1-ago-17 Aug-17 Sep-17 1-oct-17 Oct-17 1-nov-17 Nov-17 1-dic-17 Dec-17 1-ene-18 Jan-18 1-feb-18 Feb-18 1-mar-18 Mar-18 1-abr-18 Apr-18 1-may-18 May-18 1-jun-18 Jun-18 1-jul-18 Jul-18 and reaction Source : Economic Commission for Latin America and the Caribbean (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.

Capital flows toward emerging markets registered a sustained increase in 2017, but have declined in 2018 and Latin America is no exception CAPITAL FLOWS TO EMERGING MARKETS, 12-MONTH LATIN AMERICA (13 COUNTRIES): PROXY INDICATOR OF CUMULATIVE FLOWS, JANUARY 2015 TO APRIL 2018 a CAPITAL FLOWS TO THE REGION, JANUARY 2016 TO MAY (In billions of US dollars) 2018 (Index base January 2016=100, 12 month moving average) 350 130 120 300 110 250 100 200 90 150 80 100 70 50 60 0 50 -50 40 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Source : Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

Sovereign risk began to rise in February in line with the increased tension in global financial markets LATIN AMERICA (13 COUNTRIES): SOVEREIGN RISK ACCORDING TO THE EMERGING MARKET BOND INDEX GLOBAL (EMBIG), JANUARY 2012 TO JUNE 2018 (Basis points) 700 31-Dec-15 31-Dec-16 31-Dec-17 29-Jun-18 Argentina 438 455 351 608 Bolivia 250 83 203 295 650 Brasil 548 330 232 326 Chile 253 158 117 144 Colombia 317 225 173 197 600 Dominican Rep. 421 407 275 348 Ecuador 1,266 647 459 761 Mexico 315 296 245 281 Panama 214 187 119 152 550 Paraguay 338 281 200 245 Peru 240 170 136 166 Uruguay 280 244 146 200 500 Venezuela 2,807 2,168 4,854 5,011 Latin America 605 473 419 497 450 400 350 300 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 Jan-18 Apr-18 Source : Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of JP Morgan.

Latin America exhibits on average a slow rate of economic growth in 2018 with significant subregional differences LATIN AMERICA: YEAR-ON-YEAR CHANGE IN QUARTERLY GDP, 2014 TO 2018 (Percentages, on the basis of 2010 constant dollars) 5 4 3 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 2014 2015 2016 2017 2018 Latin America Mexico and Central America South America Source : Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

Domestic demand is the principal driver of GDP growth LATIN AMERICA: GDP GROWTH RATES AND CONTRIBUTION OF EXPENDITURE COMPONENTS TO GROWTH, 2014 TO 2018 (Percentages, on the basis of 2010 constant dollars) Mexico and Central America 8 Latin America 8 6 4 6 2 4 0 -2 2 -4 I II III IV I II III IV I II III IV I II III IV I 0 2014 2015 2016 2017 2018 South America -2 8 6 -4 4 -6 2 I II III IV I II III IV I II III IV I II III IV I 0 2014 2015 2016 2017 2018 Private consumption General government consumption -2 Gross fixed capital formation Inventories -4 Exports of goods and services Imports of goods and services Producto interno bruto a precios de mercado -6 I II III IV I II III IV I II III IV I II III IV I 2014 2015 2016 2017 2018 Source : Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

The current account deficit widened slightly in 2018 LATIN AMERICA (19 COUNTRIES): BALANCE-OF-PAYMENTS CURRENT ACCOUNT BY COMPONENT, 2009 TO 2018 a (Percentages of GDP) 3 Components of the current account by subregion (Balances as percentage of GDP) 2 2016 2017 2018 CENTRAL AMERICA AND MEXICO Current account -2.1 -1.7 -1.9 1 Goods -3.7 -3.4 -3.7 Services 0.8 0.8 0.8 0 Income -3.0 -2.8 -2.9 Current transfers 3.8 3.8 3.9 -1 -1.4 SOUTH AMERICA -0.7 -1.9 Current account -1.8 -1.3 -1.4 -1.6 -2 Goods 1.8 2.3 2.5 -2.0 -2.0 Services -1.6 -1.5 -1.7 -2.3 -3 -2.7 Income -2.5 -2.7 -2.8 -3.1 Current transfers 0.6 0.5 0.6 -3.3 -4 THE CARIBBEAN Current account -5.9 1.0 -5 Goods -12.3 -5.4 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Services 4.0 1.9 Income -2.9 -1.9 Current transfers balance Income balance Services balance Current transfers 5.3 6.4 Goods balance Current account balance Source : Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures. a Values for 2018 correspond to forecasts.