Latin America will face a widespread recession this year as consumption slows and central banks keep interest rates high, according to the latest projection from Oxford Economics.
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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.
High borrowing costs in Brazil and Mexico, plus a slowdown in the United States, will continue to weigh on growth, Marcos Casarin, chief Latin America economist at Oxford, 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.
“Based on carryover alone, most countries could post a contraction in GDP in the first quarter. We believe the ongoing correction is being driven by internal factors.»
Analysts forecast that the central banks of Colombia and Mexico will continue to raise rates, with Colombia expected to raise rates by 50 basis points and Mexico by 25 basis points in upcoming March policy decisions.
Other factors limiting growth include “fiscal consolidation efforts and idiosyncratic political factors that inject uncertainty”.
Gross domestic product is still expected to expand 0.6% in Latin America in 2023, Oxford Economics said, a more pessimistic outlook than the International Monetary Fund’s projection earlier this year of 1.8% growth.
