Latin America will have low growth Uruguay It will not be the exception, according to the bank’s forecasts City, one of the most important in the United States; and in line with the forecasts of important financial organizations such as the International Monetary Fund (IMF) and the World Bank (WB).
“The situation of Latin America 2022-2024 depends on external conditions such as the situation of China and the Federal Reserve (Fed)but also domestic issues”, began his presentation by the chief economist for Latin America at Citi, Ernesto Revilla, during the Annual Latin America Treasury and Finance Conference of the banking institution.
In this sense, he pointed out that the world economy would grow by 2.2% this year, evidencing a slowdown compared to 2022 —in the process of post-pandemic recovery that helped boost the overall numbers. “The good news is that we expected lower growth at the beginning of the year,” which is partly reversed because “the first quarter economic indicators They are coming stronger than expected,” he added, although he clarified that, in any case, this is a deceleration.
By 2024 the bank expects the world economy to grow 2.6%.
Interest rates, a concern for the region
He main risk for Latin America What comes along with these forecasts is “the Fed wants to have price stability and we think that it is going to raise (its interest rates) more than what the market expects (which is only a rise of more than 25 basis points),” Revilla said. . “We think that inflation continues to be the main problem and the Fed will make three more 25 basis point hikes, taking the rate to 5.75%,” he added.
In this sense, the chief economist for the region explained that “if we have higher rates, we will have more risk aversionless world economic growth and this is a headwind for Latin America”.
The commodity prices It will be another fundamental factor for the continent. In this regard, Revilla pointed out that there will be a drop in the price of agricultural products, enough to help reduce inflation, but without harming producers.
What will happen to Uruguay?
In the Uruguayan case, Citi forecasts growth of Gross Domestic Product (GDP) 2% for this year, and 2.7% for the next; as well as inflation of 7% and the dollar at 42 pesos at the end of 2022.
For this, the decision made by the Monetary Policy Committee (Copom) during their next meeting on April 19, where they will have to define what to do with the reference rates —with a productive system that is asking for a drop, a promise to end the contractive monetary policy and international pressure to raise rates by at least 25 basic points.
The truth is that Citi’s forecasts for the country seem contradictory, especially at a time of technical recession declared and greater risks for growth if the reference rates continue to be raised —currently at 11.50%.
Likewise, the dollar has not managed to break the floor of 39 pesos so far in April, and the movements of the Monetary Policy Rate (MPR) It will also have a strong influence in this regard. Above all, if one takes into account that the same US bank predicts that the currencies of the countries “will remain relatively stable” against the dollar.
The expectation is placed on Citi’s projection and on the possibility that during the second half of the year, rates will finally begin to fall.
Source: Ambito
