Economic Survey of Latin America and the Caribbean 2019
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2019 Economic Survey of Latin America and the Caribbean The new global financial context: effects and transmission mechanisms in the region Thank you for your interest in this ECLAC publication ECLAC Publications Please register if you would like to receive information on our editorial products and activities. When you register, you may specify your particular areas of interest and you will gain access to our products in other formats. www.cepal.org/en/publications ublicaciones www.cepal.org/apps 2019 Economic Survey of Latin America and the Caribbean The new global financial context: effects and transmission mechanisms in the region 2 Executive summary Economic Commission for Latin America and the Caribbean (ECLAC) Alicia Bárcena Executive Secretary Mario Cimoli Deputy Executive Secretary Raúl García-Buchaca Deputy Executive Secretary for Management and Programme Analysis Daniel Titelman Chief, Economic Development Division Ricardo Pérez Chief, Publications and Web Services Division The Economic Survey of Latin America and the Caribbean is issued annually by the Economic Development Division of the Economic Commission for Latin America and the Caribbean (ECLAC). The 2019 edition was prepared under the leadership of Daniel Titelman, Chief of the Division, and coordinated by Ramón Pineda Salazar and Daniel Titelman. In the preparation of this edition, the Economic Development Division was assisted by the Statistics Division, the Division of International Trade and Integration, the ECLAC subregional headquarters in Mexico City and Port of Spain, and the Commission’s country offices in Bogotá, Brasilia, Buenos Aires, Montevideo and Washington, D.C. Part I, entitled, “The economic situation and outlook for 2019”, was prepared with input from the following experts: Alejandra Acevedo, Claudio Aravena, Pablo Carvallo, Claudia de Camino, Ivonne González, Michael Hanni, Juan Pablo Jiménez, Noel Pérez, Esteban Pérez Caldentey, Ramón Pineda Salazar, José Antonio Sánchez, Cecilia Vera and Jürgen Weller. Part II, entitled “The new global financial context: effects and transmission mechanisms in the region”, was coordinated by Esteban Pérez Caldentey and Daniel Titelman. It was prepared with inputs from Pablo Carvallo, Claudia de Camino, Albert Klein, Ricardo Mayer, Esteban Pérez Caldentey, José Antonio Sánchez, and Cecilia Vera. Tarek Abdo, Cristóbal Budnevich, Luis Diaz, Luis Méndez, Carlos Julio Moreno and Lorenzo Nalin provided research assistance. It included inputs prepared by the consultant Gerald Epstein. The country notes were prepared by the following experts: Alejandra Acevedo, Olga Lucía Acosta, Maharouf Adedayo, Dillon Alleyne, Anahí Amar, Martín Cherkasky, Claudia de Camino, Randolph Gilbert, Sonia Gontero, Enrique González, Michael Hendrickson, Álvaro Lalanne, Jesús López, Sara Lynn, Sheldon McLean, Rodolfo Minzer, Carlos Mussi, Ramón Padilla, Machel Pantin, Juan Pérez, Ramón Pineda Salazar, Juan Carlos Ramírez, Juan Carlos Rivas, Indira Romero, Jesús Santamaría, Nyasha Skerrette, Hidenobu Tokuda, Juan Valderrama, Carlos Valdés and Francisco Villarreal. José Luis Germán, Michael Hanni and Albert Klein reviewed the country notes for the Caribbean. Claudio Aravena, Pablo Carvallo, Georgina Cipoletta and Juan Pablo Jiménez assisted in the revision of the country notes for Latin America. Sonia Albornoz prepared the statistical annex. United Nations publication ISBN: 978-92-1-122020-9 (print) ISBN: 978-92-1-047942-4 (pdf) ISBN: 978-92-1-358257-2 (ePub) Sales No.: E.19.II.G.3 LC/PUB.2019/12-P Explanatory notes Distribución: G - Three dots (...) indicate that data are not available or are not separately reported. Copyright © United Nations, 2019 - A dash (-) indicates that the amount is nil or negligible. All rights reserved - A full stop (.) is used to indicate decimals. Printed at United Nations, Santiago - The word “dollars” refers to United States dollars unless otherwise specified. - A slash (/) between years (e.g. 2013/2014) indicates a 12-month period falling between the two years. S.19-00413 - Individual figures and percentages in tables may not always add up to the corresponding total because of rounding. This publication should be cited as: Economic Commission for Latin America and the Caribbean (ECLAC), Economic Survey of Latin America and the Caribbean, 2019 (LC/PUB.2019/12-P), Santiago, 2019. Applications for authorization to reproduce this work in whole or in part should be sent to the Economic Commission for Latin America and the Caribbean (ECLAC), Publications and Web Services Division, [email protected]. Member States and their governmental institutions may reproduce this work without prior authorization, but are requested to mention the source and to inform ECLAC of such reproduction. CONTENTS Introduction............................................................................................................................................................... 13 Executive summary.................................................................................................................................................. 15 Part I The economic situation and outlook for 2019 ..................................................................................................... 23 Chapter I Regional overview ................................................................................................................................................... 25 A. The international context ................................................................................................................................ 27 1. World economic growth is estimated at 2.6% in 2019, four tenths of a percentage point below growth in 2018, with the slowdown heavier in developed than in developing economies ........ 27 2. Global trade is increasingly weakening amid growing trade tensions ................................................... 28 3. Uncertainty and volatility continue in financial markets ......................................................................... 29 4. Commodity prices are projected lower than those of 2018 on average ................................................. 31 B. The trend of global liquidity ............................................................................................................................ 35 1. In 2018 the global liquidity cycle turned down in keeping with global economic conditions ................ 35 2. The turning point in the liquidity cycle is partly explained by the normalization of monetary policy in the United States....................................................................................................................... 36 3. Cross-border financing to emerging economies drops sharply ............................................................... 36 4. Liquidity has tightened while households and the non-financial corporate sector in the vast majority of developed economies have deleveraged .............................................................................. 39 5. The United States is an exception to non-financial corporate sector deleveraging ............................... 40 6. Non-financial corporate sector debt has grown in developing economies ............................................ 42 7. The outlook for 2019 ................................................................................................................................ 44 C. The external sector ......................................................................................................................................... 45 1. The balance-of-payments current account deficit remained relatively stable in 2019 .......................... 45 2. The merchandise trade surplus is expected to fall sharply in 2019 as a result of a slowdown in export volumes and a drop in export prices ........................................................................................ 45 3. On average, the region’s terms of trade are expected to worsen in 2019, although the Caribbean and Central American economies should benefit from lower energy prices .......................................... 48 4. The services deficit is expected to narrow in 2019, mainly as a result of lower imports in line with the regional economic slowdown ........................................................................................ 49 5. The income deficit will narrow in 2019 because foreign companies’ profits will fall ............................ 50 6. The balance of transfers, composed mainly of remittances, is expected to have a larger surplus in 2019 ........................................................................................................................... 50 7. Financial flows to the region recovered slightly during the first quarter of 2019, a situation that could have been reversed since May, following the trend seen in the group of emerging markets............................................................................................................ 51 8. The growth in sovereign risk seen throughout 2018 stalled at the beginning of the year but picked up again recently in response to greater global uncertainty ................................................. 52 9. Debt issues fell 35% year-on-year in the first five months of 2019 ....................................................... 53 D. Economic activity ..........................................................................................................................................