Fitch Ratings analysts Richard Francis, Todd Martínez and Charles Seville spoke at a Fitch event about the outlook for Latin America in 2022.
Martínez estimated that in Brazil a weaker currency, inflationary pressures and a greater adjustment by the central bank will cause a “big slowdown” in economic growth.
The analyst considered that the political noise in that country will not disappear, especially in an election year, and that to stabilize the outlook, Fitch needs to see “some confidence that there will be no more tax diversions”.
“We need confidence that the central bank will do what is necessary to contain inflation expectations and preserve macroeconomic stability.”, he added.
He further said that rapid inflation “it’s a big problem, it’s eating up real income, it’s also forcing one of the most aggressive monetary adjustments in the world”.
Meanwhile, Richard Francis estimated about Chile that economic growth in 2021 could have even reached 12%. “Even with the election of Gabriel Boric we are going to see an important fiscal adjustment“, he pointed.
Social spending is expected to continue, but the fiscal deficit is set to fall to around 4% of GDP in 2022, from more than 7% last year.
In this regard, he said that cash transfers during the pandemic were quite onerous.
In relation to Colombia, Francis said that this economy is expected to have grown 9.4% in 2021, although it could have exceeded 10%.
The fiscal deficit exceeded 7% in 2021 despite rapid economic growth, while the expansion of infrastructure spending will bring the 2022 deficit to more than 6% of GDP.
The high fiscal deficitwas one of the main factors why we lowered Colombia’s rating to BB+”, he specified.
For his part, Charles Seville stressed that inflation in Mexico is higher than expected, and is causing significant increases in interest rates by the central bank.
Indicators point to a slowdown and Fitch is likely to lower its GDP growth forecast, Seville warned.
“We need a real pick-up in momentum for growth to reach our forecast of around 2.5% this year”, he commented.
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