All Latin America GDP Growth Forecasts Cut Except Chile by Morgan Stanley
MS le recorta el estimado de crecimiento a todas las economias de Latinoamerica excepto Chile
La region se expandira 3.6% en lugar de 4.6% debido a que el menor crecimiento de Europa y US afectara la demanda de las materias primas.
By Bill Faries and Matthew Bristow - Aug 22, 2011 1:17 PM ET .
Morgan Stanley cut its forecast for Latin American economic growth this year and next, saying the region is “unlikely to be spared” from a global slowdown.
The region’s economies will expand 3.6 percent next year from a previous forecast of 4.6 percent, as slower growth in Europe and the U.S. takes its toll on demand for the region’s commodities, Morgan Stanley’s chief Latin America economist, Gray Newman, said in an e-mailed report.
“An extended bout of weakness in the developed world is likely to see both Chinese exports and import demand soften and with that commodity prices, which have underpinned Latin America’s era of abundance,” the report said. “Ultimately, we concluded that Latin America would unlikely be spared.”
The slower growth outlook means that central banks across the region will now hold or cut borrowing costs, the report said. Countries including Brazil, Peru, Colombia and Chile have all raised interest rates this year to cool inflationary pressure. Morgan Stanley economist Arthur Carvalho expects Brazil’s central bank to begin cutting rates by mid-2012 to 11.5 percent, from 12.5 percent today.
Lower Growth
Colombia’s central bank unexpectedly kept its benchmark interest rate unchanged last week for the first time in seven months, citing “high uncertainty in international financial markets.” Chile’s central bank last week kept borrowing costs unchanged for the second consecutive month.
All growth forecasts for Latin America, except for Chile, were cut by one percentage point, the report said. Chile was left unchanged since its gross domestic product was growing from a lower base due to the 2010 earthquake, Newman said in a telephone interview from New York.
Morgan Stanley also trimmed its 2011 growth forecast for the region to 4.4 percent, from 4.6 percent.
Compared with advanced countries, the region’s economies have less debt, and low fiscal and current account deficits, meaning they will only suffer lower growth rather than a “fully fledged financial crisis,” according to Morgan Stanley.
Argentina and Venezuela are the countries at greatest risk of a “non-linear event,” Newman said.
Some regional economies are already showing signs of cooling. Brazil’s economic activity shrank in June for the first time since December 2008 and business confidence in the second quarter slid to its lowest level since 2009.
Mexico’s industrial production fell 0.6 percent in June from May, its biggest decline in two years. The Mexican peso is likely to be the Latin currency hardest hit by a slowdown, due to Mexico’s close links to the fragile U.S. economy, the report said.
Commodities prices have fallen 15 percent since the end of April, according to the Standard & Poor’s GSCI Index.
To contact the reporter on this story: Bill Faries in Buenos Aires at
wfaries@bloomberg.net.
To contact the editor responsible for this story: Harry Maurer