Growth to slow amid global headwinds

The economies of Latin America will continue to outperform their peers in the developed world over the coming quarters, but growth is set to slow in 2013 and will be lacklustre by the standards of the past few years. The region’s recent resilience in the face of a weakening global economy has been due mainly to the strength of domestic demand. But in most countries, the drivers of domestic demand are set to fade next year, with falling commodity prices and a slower pace of credit growth likely to take some steam out of the region’s consumer boom. The good news is that most countries have space for policy stimulus if required. For this reason we generally expect growth to moderate, rather than collapse: our forecast is for regional GDP to grow by 2.5% in 2013, down from 3.0% or so in 2012. At a country level, Mexico looks most likely to outperform relative to recent standards. By contrast, years of macro-mismanagement are catching up with Argentina and Venezuela and we expect recessions in both countries in 2013.