Latin America Real GDP Performance and Forecast, Q1 2009

First Quarter 2009

Latin America Real GDP Performance and Forecast

Regional Growth Prospects for 2009 Continue to Deteriorate

Real annual GDP growth in Latin America was 4.3 percent in 2008, the slowest pace in five years, but still historically strong. However, against the backdrop of a deepening global economic downturn, expectations for Latin American GDP has been revised down by 1.9 percentage points since Q408 to a meager 0.1 percent growth for 2009 as a whole.

The region's economy is expected to decelerate markedly this year, as growth in three of the region's four largest economies—Mexico, Venezuela, and Argentina—contracts. Virtually every country in the region experienced downward revisions to 2009 growth forecasts since Q408. Mexico saw the most pronounced downgrade, as forecasters cut their projections for 2009 from 0.4 percent growth to a 1.9 percent contraction, as spillover from the U.S. recession exacerbates economic weakness.

Robust domestic demand in the first three quarters of the year, along with surging fuel and food prices, pushed regional inflation to 8.6 percent in 2008, according to Latin Focus Consensus Forecast. This year however, a combination of slowing demand and soft commodity prices is likely to contain inflation pressures somewhat, although rising prices in Argentina and Venezuela will keep it elevated at around 8.2 percent.

Real GDP Performance and Forecast
2006 2007 2008 2009 2010
Argentina 8.5 8.7 6.9 –0.4 2.2
Bolivia 4.7 4.6 5.6 3.4 3.1
Brazil 3.9 5.7 5.2 0.6 3.4
Chile 4.6 4.7 3.6 0.8 3.4
Colombia 6.9 7.5 3.2 0.5 3.1
Costa Rica 8.8 7.8 3.5 1.4 3.4
Cuba 12.1 7.3 4.3 3.0 3.8
Dominican Republic 10.7 8.5 5.0 0.8 5.8
Ecuador 3.9 2.5 5.3 –0.1 1.9
El Salvador 4.2 4.7 3.1 0.8 2.5
Guatemala 5.4 6.3 4.3 1.3 3.1
Honduras 6.3 6.3 4.1 1.9 2.7
Jamaica 2.7 1.4 0.2 –1.4 1.5
Mexico 5.1 3.3 1.6 –1.9 2.7
Nicaragua 3.9 3.8 3.0 1.3 2.8
Panama 8.5 11.5 8.8 3.3 4.5
Paraguay 4.3 6.8 5.7 1.2 3.8
Peru 7.7 8.9 9.5 4.6 5.1
Uruguay 7.0 7.4 9.5 2.7 3.0
Venezuela 10.3 8.4 5.2 –0.5 –0.2
Total 5.6 5.6 4.3 0.1 3.0

Source: IMF, Consensus Economics, Latin Focus, JP Morgan, EIU