Juan Carlos Moreno Brid Deputy Director ECLAC Mexico JAWAHARLAL NEHRU UNIVERSITY New Delhi January 2012 Global growth has slowed sharply after the recovery from the crisis ID: 257836
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Slide1
Latin America’s economic outlook to infinity and beyond
Juan Carlos Moreno
Brid
Deputy
Director
ECLAC -
Mexico
JAWAHARLAL NEHRU UNIVERSITY,
New Delhi,
January
2012Slide2
Global growth has slowed sharply after the recovery from the crisis
WORLD GDP GROWTH RATES, 2009-2012
(Percentages)
e/ Estimate. p/ Projection.Slide3
And volatility and uncertainty increased in 2011EUROPE (SELECTED COUNTRIES): FIVE-YEAR CREDIT DEFAULT SWAP RISK PREMIUMS, 2009-2011(Basis points)Slide4
VOLUME OF WORLD EXPORTS BY REGION, 2007-2011 (Annual growth rates, three-month moving average)Latin
America
’s export g
rowth
of
volumes
is
slowingSlide5
And also the prices for
its
main
exports
GLOBAL COMMODITY PRICE INDEXES, 2002-2001
(Index: annual average price for 2002=100)Slide6
LATIN AMERICA: TERMS OF TRADE, 2005-2011(Index: 2005=100)
In LA Terms of trade were favorable for
much of 2011Slide7
Import volumes and prices grew fastLATIN AMERICA: ESTIMATED VARIATION IN THE VALUE OF IMPORTS BY VOLUME AND PRICE, 2011
(
Percentages
)Slide8
And international reserves soarLATIN AMERICA AND THE CARIBBEAN: INTERNATIONAL RESERVES(Millions of dollars)Slide9
Fiscal deficit shrunk due to less G more T LATIN AMERICA (19 COUNTRIES): CENTRAL GOVERNMENT FISCAL INDICATORS, 2000-2011(Simple averages as percentages of GDP)Slide10
Public debt came down again and its composition continued to shiftLATIN AMERICA (19 COUNTRIES): CENTRAL GOVERNMENT PUBLIC DEBT BALANCE, DOMESTIC AND EXTERNAL(Percentages of GDP)Slide11
Inflation rose but it is still low
LATIN AMERICA
:
COMPONENTS OF INFLATION, JANUARY 2007 – NOVEMBER 2011
(12-month
inflation
rate
, simple
averages
)Slide12
And what happens to output and the current account?Slide13
In the third quarter, the slowdown in growth began to steepenLATIN AMERICA: QUARTER-ON-QUARTER GROWTH IN GDP,SEASONALLY ADJUSTED SERIES(
Percentages
)Slide14
All demand components slack since mid 2010 LATIN AMERICA: GDP AND DOMESTIC DEMAND COMPONENTS, 2010-2011ª
(Dollars at constant 2005 prices, change over year-earlier period)
a/ Estimate.Slide15
Growth slowed from 5.9% in 2010 to 4.3% in 2011 and will …LATIN AMERICA AND THE CARIBBEAN: GDP GROWTH RATES, 2011(
Percentages
)Slide16
But the current account deficit widens CURRENT ACCOUNT STRUCTURE (
Percentages
of GDP)Slide17
Short term capital and FDI finance current account deficitLATIN AMERICA (SELECTED COUNTRIES): CURRENT ACCOUNT BALANCE
AND COMPONENTS OF THE FINANCIAL ACCOUNT, 2011
(
Miillions
of
dollars
)Slide18
Currency appreciation continued…
LATIN AMERICA AND THE CARIBBEAN: REAL EFFECTIVE EXTRAREGIONAL EXCHANGE RATES, 2008-2011
(
Index
:
average
for
1990-2009
= 100)Slide19
Scenario for infinity and beyondIn 2012
ECLAC’s baseline scenario: economic growth will continue to slacken, now o 3.7% in 2012)Slide20
And to infinity (-2012) and beyond?Slide21
Two visions on long term growth’s determinants As long as inflation, fiscal deficits and stae interventions are under control, low and preferably zero.. Growth will eventually boomAbove conditions are necessary but insufficient . Key and somewhat different constraints bind the various Latin American countries’ growth . In Slide22
One lens: the BPC growth modelHarrod,
Prebisch
,
Thirlwall
, Gap
models
Long
term
growth
must be consistent
with a sustainable balance of payments
(vs
Lawson
,
Corden
at al
Does
the
Current
Account
matter
?)
BPC
Specifications
:
levels
or
ratios,
trade
and factor
payments
from
abroad
X – M = 0, (X – M) / Y ≤ k,
interest,
remittances
GNP
= GDP + Net Factor Payments from abroad and terms of trade effects
Slide23
Thirlwall’s model of BPC growth
Income
elasticity
of
imports
External demand
Effect
of real
exchange
rate
cum
price
elasticities
of
trade
Income
elasticity
of
imports
Slide24
When Z slows down the BPC becomes more binding. Plan A Deflate and devalue …and stagnate some timePlan B
i
) Diversify external demand
ii) Rely more on domestic market…change trade
elasticities
(composition of X and Q)
industrial/trade policy, Y-distribution
+ investment private and public
iii) Shift real exchange rate
24Slide25
Plan C Apply the BPCC model B ring in, P ray for,
C
onvince
C
apital
inflows to increasingly keep coming to finance your current account, maybe default
25Slide26
But if PLAN A, B and C (combined or not) fail and the current account deficit keeps increasing as a share of GDP…then wait forSlide27
The Casablanca Conclusion“…You will regret it, maybe not today, maybe not tomorrow but soon and for the rest of your life…” Rick Blaise (Humphrey Bogart) to Ilsa Lund (Ingrid Bergman) at –nearly- the end of Casablanca the filmSlide28
Shukriya
!
Dhanyavaad
!