The political crisis worsened in Peru over the last two months. In the very short term, political instability should continue, and weigh on the economic outlook.
Inflation in Latin America is growing at its fastest pace in over 20 years. Already in 2021, inflation had doubled to reach 6.6% – a level comparable to the financial crisis of 2008. In 2022, inflation projections are even higher and should come in at some 8 to 10%. So which countries have witnessed the largest price increases? What are some of their drivers? And what are monetary authorities doing to contain them?
After a rebound over 13%, one of the highest growth rates in the region, we should see a major slowdown in Peru in the next two years. On one hand, inflationary pressures, social movements and the gradual withdrawal of support measures taken by the authorities during the pandemic will weigh on domestic demand.
The Brazilian real has strongly appreciated since the beginning of the year boosted by the rise in commodity prices, the rebalancing of investment portfolios and increased real interest rate differentials with other emerging economies as well as developed markets. If the rise of the currency is helping to tame down inflation, its effects should nonetheless not be overstated.
Gabriel Boric, candidate of a vast left-wing coalition, won the second round of the Chilean presidential elections, last December. He will take office in March and his government will have a full agenda. Regarding economy, growth has slowed down since 2015.
