Latin American Outlook

2015 proved to be an extremely challenging year for Latin America’s leading economies as the downturn in global commodity prices and the slowdown in China – a key export market – took their toll on growth. The region’s largest economy, Brazil, slipped into severe recession as political woes compounded the economic crisis, registering its worst recession in decades. Moreover, the severity of the downturn is reflected in the fact that output will continue to plunge this year. Besides Brazil, Venezuela is another country in the grip of a deep recession as policy mismanagement and the collapse in global oil prices undermined growth. In other parts of the region, however, Argentina, Chile, Mexico, Colombia and Peru posted positive, albeit sub-par growth in 2015. Going forward, economic prospects for this year are not encouraging given that most countries will likely experience subdued growth, while both Brazil and Venezuela will remain in recession. On top of that, efforts by the new administration to overhaul the Argentine economy could also result in a modest drop in output this year. Weak activity in the region comes at a time of accelerating inflation in many countries, partly owing to the plunge in regional exchange rates. In response, policymakers have moved to tighten monetary conditions in recent months, but keeping a lid on inflation will remain a challenge for most countries.

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