A slightly more favourable external context for Latin America and the Caribbean The global economy saw widespread growth in 2017 (2.9%), and will remain strong in 2018 (3%) Emerging economies are the engines of growth (4.5% in 2017 and 4.8% in 2018) Commodity prices continue their upward trend The weakest performing area of the global economy is trade, which is picking up, but growth remains at historically low rates: 3.6% in 2017 and 3.2% in 2018 Volatility has eased International interest rates remain low Emerging economies have reduced their country risk
Global risks Escalating geopolitical tensions Return of protectionism Low dynamism in global productivity and investment High debt levels in the private sector in a context of low growth and inflation could result in an increase in debt in real terms Withdrawal of monetary stimulus in developed economies and normalizing interest rates will affect financial flows into emerging economies Impact of tax reform, financial and environmental deregulation in the United States on investments and levels of international financial flows
The global economy shows signs of a synchronized recovery SELECTED REGIONS AND COUNTRIES: GDP GROWTH, 2016 – 2018 a ( Percentages ) 8 7.2 7.1 6.8 7 6.7 6.7 6.5 6 4.8 5 4.5 4.0 4 3.0 2.9 3 2.4 2.4 2.2 2.2 2.1 2.1 2.0 1.8 1.8 2 1.6 1.6 1.5 1.5 1.4 1.2 1.0 1 0 World Developed United States Japan United Eurozone Emerging China India economies Kingdom market and developing economies 2016 2017ᵃ 2018ᵃ Source : ECLAC, on the basis of United Nations, World Economic Situation and Prospects, 2018, forthcoming; International Monetary Fund (IMF), World Economic Outlook (WEO), October 2017; Capital Economics, Global Economic Outlook , October 2017; and Consensus Economics. a Figures for 2017 and 2018 are projections.
The global economy is improving in a context of weak international trade YEAR-ON-YEAR VARIATION IN WORLD TRADE, THREE-MONTH ROLLING AVERAGES, 2003 – 2017 ( Percentages, on the basis of a seasonally-adjusted index ) 20 Jan 2003 - Jun 2007 15 Growth in 8% Forecast world trade accelerated but 10 2017 Jul 2011 - Dec 2015 remains at 3.6% historically low 2% 5 levels: 3.6% (WTO) 0 Forecast 2016 Cyclical factors 2018 1.4% that explained -5 3.2% the meager growth of trade -10 in recent years are being -15 reversed. But uncertainty persists related -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 to more structural factors. Source : ECLAC, on the basis of figures issued by the Netherlands Bureau of Economic Policy Analysis (CPB).
Improved global growth coincides with a decline in financial volatility IMPLIED MARKET VOLATILITY INDICES, MAY 2006 – OCTOBER 2017 70 VIX Index Global financial 60 EURO STOXX V2X Index volatility began to Emerging Markets VXEEM Index ease in 2015, 50 reflecting increasing 40 confidence among investors and 30 financial institutions 20 10 0 May-06 Nov-06 May-07 Nov-07 May-08 Nov-08 May-09 Nov-09 May-10 Nov-10 May-11 Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 May-16 Nov-16 May-17 Source : 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.
The improvement in real and financial conditions is reflected in higher liquidity flows globally and into emerging economies VARIATION IN GLOBAL FLOWS OF LIQUIDITY INTO LATIN AMERICA AND PORTFOLIO INVESTMENT FLOWS INTO EMERGING MARKETS, JUNE 2014 – JUNE 2017 300 12 250 10 Portfolio flows (Billions of US$) (left axis) 200 8 Billions of dollars Percentage 150 6 Rate of variation of global 100 4 liquidity 50 2 Rate of variation of global 0 0 liquidity towards LAC -50 -2 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Source : ECLAC, on the basis of Bloomberg and the inflation report of the Central Reserve Bank of Peru (September 2017) and on the basis of figures provided by the Bank for International Settlements (BIS), 2017. Note : Portfolio investment flows are cumulative for 12 months. Liquidity includes total credit granted by banks in the United States, Europe and Japan, and debt issues on international markets by the same group of countries.
Economic activity and macroeconomic variables in Latin America and the Caribbean
The slow recovery of economic growth in Latin America continues LATIN AMERICA: YEAR-ON-YEAR CHANGE IN QUARTERLY GDP, FIRST QUARTER OF 2013 – THIRD QUARTER OF 2017 (Percentages on the basis of dollars at constant 2010 prices) 5% Since the first quarter of 2016, GDP has been 4% trending upward in the region, reaching a three-year peak in the third quarter of 2017 3% 2% 1% 0% -1% -2% I II III IV I II III IV I II III IV I II III IV I II III 2013 2014 2015 2016 2017 Source : ECLAC, on the basis of official figures.
Economic growth was spurred by an upturn in private consumption and exports in 2017 LATIN AMERICA: GDP GROWTH RATES AND CONTRIBUTION OF EXPENDITURE COMPONENTS TO GROWTH, FIRST QUARTER OF 2013 – THIRD QUARTER OF 2017 (Percentages) 8 6 4 2 0 -2 -4 -6 I II III IV I II III IV I II III IV I II III IV I II III 2013 2014 2015 2016 2017 General government consumption Private consumption Gross fixed capital formation Exports of goods and services Imports of goods and services Inventories GDP Source : ECLAC, on the basis of official figures.
The low contribution of public spending reflected in a reduction in the primary deficit LATIN AMERICA AND THE CARIBBEAN: OVERALL AND PRIMARY DEFICIT AND INTEREST PAYMENTS, 2015 – 2017 (Percentages of GDP ) 2 Primary balance 1 Interest payments (inverted sign) Overall balance 1.2 1.2 0.8 0 -0.2 -0.2 -0.5 -0.8 -0.9 -1.0 -1.4 -1.5 -1.9 -1 -2 -2.1 -2.2 -2.3 -2.4 -2.4 -2.5 -3 -2.9 -3.1 -3.1 -3.6 -4 -3.9 -4.2 -5 2015 2016 2017 2015 2016 2017 2015 2016 2017 2015 2016 2017 Latin America (17 Central America, South America (8 The Caribbean (12 countries) Dominican Rep., Haiti and countries) countries) Mexico Source : ECLAC, on the basis of official figures.
The consolidation of the recovery is also evident in the evolution of investment LATIN AMERICA: QUARTERLY YEAR-ON-YEAR CHANGE IN GROSS FIXED CAPITAL FORMATION, FIRST QUARTER 2014 – THIRD QUARTER 2017 (Percentages, weighted average) 10 5 0 -5 -10 -15 I II III IV I II III IV I II III IV I II III 2014 2015 2016 2017 Latin America South America Mexico and Central America Source : ECLAC, on the basis of official figures.
Improved growth coincides with lower inflation for the majority of the region LATIN AMERICA AND THE CARIBBEAN: CONSUMER PRICE INDEX (CPI), WEIGHTED AVERAGE 12-MONTH RATES OF VARIATION, JANUARY 2014 – OCTOBER 2017 (Base year 2005 = 100) 12 10 8 6 5.3 4 2 0 Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct 2014 2015 2016 2017 Latin America and the Caribbean excl Venezuela (Bol. Rep. of) South America excl Venezuela (Bol. Rep. of) Central America and Mexico The Caribbean Source : ECLAC, on the basis of official figures.
In line with improveming economic growth, the unemployment rate is expected to start decreasing marginally in 2018 • Between 2016 and LATIN AMERICA AND THE CARIBBEAN (WEIGHTED AVERAGE OF 11 COUNTRIES): PARTICIPATION, EMPLOYMENT AND UNEMPLOYMENT RATES, 2012-2018 2017 the (Percentages) unemployment rate 64.0 10.0 rose from 8.9% to 9.5 63.0 9.4%, as the 9.0 62.0 participation rate 8.5 rose and the 61.0 8.0 employment rate 60.0 7.5 stagnated. 7.0 59.0 6.5 • The unemployment 58.0 6.0 rate should drop to 57.0 5.5 9.2% in 2018 as employment rises 56.0 5.0 2012 2013 2014 2015 2016 2017ᵃ 2018ᵇ on the back of higher aggregate Employment rate (left axis) Participation rate (left axis) demand. Unemployment rate (right axis) Source : ECLAC, on the basis of official figures. Note : Includes Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, Jamaica, Mexico, Paraguay, Peru and Uruguay. Some estimates based on incomplete data are included. a Preliminary data. b Estimates.
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