Diego Sánchez-Ancochea: According to the Economic Commission for Latin America and the Caribbean, the region grew by only 3.7% in 2022 and economic growth will further decrease in 2023 to 1.3%. This deceleration takes place after a lost decade in which gross domestic product [GDP] per capita went down in real terms due to the pandemic and other global shocks. Low economic growth combined with high inflation and interest rates will make policy management particularly difficult. Countries will face growing demands to increase social programmes and reduce poverty and inequality, but will have to deal with limited fiscal space. A steady increase in commodity prices driven by higher economic activity in China would make things slightly easier for commodity-exporting countries, while worsening conditions further in Central America.
Todd Martinez: Latam came through 2022 better than expected, but a weakening in economic indicators at the end of the year suggest a challenging 2023. Hopes are growing for a ‘soft landing’ in the US, a stronger rebound in China amid its economic re-opening, and a better-than-expected energy situation in Europe. But we still expect a substantial global slump, and any positive surprises could be a mixed blessing for Latam, particularly should this add to inflation pressures and reinforce tight monetary policy. Political uncertainty could impose a drag, particularly in Andean countries. Thankfully, external borrowing conditions have improved a lot for most of the countries.
