ORGANISMS
LATIN AMERICA
ECLAC. 12/18/2019. Latin American and Caribbean Economic Overview 2019. 2014-2020 will mark the lowest period of growth in 70 years
According to the Preliminary Overview of the Economies of Latin America and the Caribbean 2019 the region will grow 0.1% in 2019 and 1.3% in 2020. The region’s economic deceleration is widespread and synchronized among countries and sectors, topping off six consecutive years of low growth. The report indicates that the deceleration in domestic demand is being accompanied by low external aggregate demand and more fragile international financial markets. This context is compounded by growing social demands and pressure to reduce inequality and increase social inclusion.
DESCRIPTION
This edition of the Preliminary Overview of the Economies of Latin America and the Caribbean is released amid an extremely complex economic and social context for the region. Latin America is showing a synchronized economic slowdown at the country and sector levels. In contrast to previous years, in 2019 growth in economic activity is slowing in 18 of the 20 countries of Latin America, and in 23 of the 33 countries of the Latin American and Caribbean region as a whole. The slackening of domestic demand has been accompanied by low aggregate external demand and more fragile international financial markets. Added to this scenario are the growing social demands and pressures to reduce inequality and improve social inclusion, which have emerged unusually forcefully in certain countries of the region.
The macroeconomic panorama of the last six years (2014–2019) shows a tendency towards slowing economic activity, with falls in per capita GDP, investment, per capita consumption and exports, and a sustained decline in the quality of employment. In these circumstances, the economies of Latin America and the Caribbean are set to grow at an average rate of 0.1% in 2019. Although the growth projections for 2020 show an improvement with respect to 2019, they remain subdued, with the countries expected to grow at an average rate of 1.3%.
If this projection is borne out, the seven years from 2014 to 2020 will have been the slowest economic growth period in 40 years. This comes in a global context of low growth and increasing vulnerability, with no significant positive catalysts expected. Coordinated, expansionary domestic economic policies are therefore needed to boost countries’ growth. The main economic policy challenge is preventing the region from falling into economic and social stagnation, while maintaining progress on macrofinancial stability and debt sustainability.
Despite the constraints on policy space today, most countries in the region —unlike in earlier periods— have historically low inflation and relatively large international reserves. Furthermore, most can still draw on international financial markets, amid historically low international interest rates. These conditions are amenable to the implementation of macroeconomic policies to stimulate aggregate demand.
TABLE OF CONTENTS
Executive summary .-- Chapter I. Global economic trends .-- Chapter II. Global liquidity .-- Chapter III. The external sector .-- Chapter IV. Economic activity .-- Chapter V. Domestic prices .-- Capítulo VI. Employment and wages .-- Capítulo VII. Macroeconomic policies .-- Chapter VIII. Challenges and prospects for Latin America and the Caribbean in 2020 .-- Statistical annex.
FULL DOCUMENT: https://www.cepal.org/en/publications/45001-preliminary-overview-economies-latin-america-and-caribbean-2019?utm_source=cepal-news&utm_medium=email&utm_campaign=cepal_news_december_2019
GLOBAL ECONOMY
IMF. DECEMBER 18, 2019. 2019 in Review: The Global Economy Explained in 5 Charts
By Gita Gopinath, Gian Maria Milesi-Ferretti, and Malhar Nabar
Global growth this year recorded its weakest pace since the global financial crisis a decade ago, reflecting common influences across countries and country-specific factors.
Rising trade barriers and associated uncertainty weighed on business sentiment and activity globally. In some cases (advanced economies and China), these developments magnified cyclical and structural slowdowns already under way.
Further pressures came from country-specific weakness in large emerging market economies such as Brazil, India, Mexico, and Russia. Worsening macroeconomic stress related to tighter financial conditions (Argentina), geopolitical tensions (Iran), and social unrest (Venezuela, Libya, Yemen) rounded out the difficult picture.
With the economic environment becoming more uncertain, firms turned cautious on long-range spending and global purchases of machinery and equipment decelerated. Household demand for durable goods also weakened, although there was a pick up in the second quarter of 2019. This was particularly evident with automobiles, where regulatory changes, new emission standards, and possibly the shift to ride-shares weighed on sales in several countries.
Faced with sluggish demand for durable goods, firms scaled back industrial production. Global trade—which is intensive in durable final goods and the components used to produce them—slowed to a standstill.
Central banks reacted aggressively to the weaker activity. Over the course of the year, several—including the US Federal Reserve, the European Central Bank (ECB), and large emerging market central banks—cut interest rates, while the ECB also restarted asset purchases.
These policies averted a deeper slowdown. Lower interest rates and supportive financial conditions reinforced still-resilient purchases of nondurable goods and services, encouraging job creation. Tight labor markets and gradually rising wages, in turn, supported consumer confidence and household spending.
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