Latin America will face a generalized recession this year as consumption slows and central banks keep interest rates high, according to the latest projection from Oxford Economics.
It is expected that Argentina, Chile and Colombia face contractions throughout the yearsince consumption in the region began to decline at the end of last year.
The high borrowing costs in Brazil and Mexico, plus a slowdown in the United Stateswill continue to weigh on growth, Marcos Casarin, Oxford’s chief Latin America economist, and colleagues wrote in a note Friday.
“Data released this week confirmed our view that Latin America is fast approaching a synchronized recession after most economies overheated in early 2022.″, the analysts said in the note.
(See: What is the ‘soft landing’ that the IMF predicts for the economy).
“Based solely on the carryover effect, most countries could post a contraction in GDP in the first quarter. We believe the ongoing correction is being driven by internal factors.”
The analysts forecast that the central banks of Colombia and Mexico will continue raising ratesand Colombia is expected to raise them by 50 basis points and Mexico by 25 basis points in the next monetary policy decisions in March.
(Also: The main obstacles for Latin America to have a single currency).
Other factors constraining growth include “fiscal consolidation efforts and idiosyncratic political factors that inject uncertainty.”
Still Gross domestic product is expected to expand by 0.6% in Latin America in 2023said Oxford Economics, a more pessimistic outlook than the International Monetary Fund’s projection earlier this year of growth of 1.8%.