Economic Research: Our Latin America Economic Outlook Turns Negative For 2016 On Low Oil Prices And Brazil's Pains

Economic activity across most of the region deteriorated in the fourth quarter of 2015 and the beginning of this year, in part because of heightened volatility in financial markets and a further drop in commodities prices, particularly oil. Furthermore, rising interest rates in the U.S. are putting pressure on central banks in the region to hike their own benchmark interest rates in order to contain inflation expectations despite sluggish domestic demand. As a result, Standard&Poor's has once again cut its regional real GDP growth forecasts for Latin America. We now forecast regional real GDP to fall by 0.2% in 2016 (compared with a 0.5% expansion previously; see "Growth Will Likely Remain Weak, Though The Effect On Latin American

...Economic activity across most of the region deteriorated in the fourth quarter of 2015 and the beginning of this year, in part because of heightened volatility in financial markets and a further drop in commodities prices, particularly oil. Furthermore, rising interest rates in the U.S. are putting pressure on central banks in the region to hike their own benchmark interest rates in order to contain inflation expectations despite sluggish domestic demand. As a result, Standard & Poor's has once again cut its regional real GDP growth forecasts for Latin America. We now forecast regional real GDP to fall by 0.2% in 2016 (compared with a 0.5% expansion previously; see "Growth Will Likely Remain Weak, Though The Effect On Latin American Ratings Will Be Mixed," published Dec. 8, 2015, on RatingsDirect) and to expand by 2.1% in 2017 (compared with 2.4% previously). Lower regional GDP growth primarily reflects a weaker outlook for Brazil, the region's largest economy, where ongoing political instability...

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