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Content of the presentation
1. The international context
2. Internal performance
 Economic Activity
 Inflation
 Employment
3. Foreign trade and capital flows
4. Macroeconomic policies
 Fiscal policy
 Monetary, exchange rate and macroprudential policy
5. Perspectives for 2012 and 2013
1. The International Context
The international context: uncertainty and
turbulence increase
Three key facts, with differing effects depending on the country and sub-region,
have been important during the beginning of 2012:
1. The uncertainty in the Euro Zone since 2010-2011:

Initially it fell (1st quarter 2012) due to action by the BCE (end of 2011) and
the initial agreement with Greece (most of the 1st quarter fo 2012)

Afterwards (2nd quarter 2012) it grew due to:
- Questions regarding the sustainability of the stabilization program adopted by Greece
- Problems with the Spanish banking system and the risk of spillovers to Spain and
Italy.
2. The precarious growth of the United States economy
3. A growth slowdown in China and India, although:

It is likely that the previous Chinese growth rate was not sustainable and
that its current trajectory, with a greater proportion of consumption and
less investment, and with a lower growth rate (between 7 and 8.2%), is
more sustainable

The reduction in the Chinese inflation rate has opened room for the
implementation of counter-cyclical policies in the event there is a sharp
downturn.
International context: two possible scenarios
Scenario I
The more likely scenario: an orderly management of the problem with Greece
and the containment of similar contagion for other EU members :
- A moderate recession in most of the European countries, but the fiscal adjustment
becomes more flexible in the short term for problems related to political and
economic stability
- A reduction in the imports from Latin America and the Caribbean that will affect
those countries with a greater proportion of their exports destined to Europe
- A certain “flight to quality” of financial flows (investment in assets denominated in
US$), increased financial and exchange rate volitility, but without a drying up of
resources in LAC
- Lower remittance and tourist flows from Europe to LAC
- Global uncertainty reduces, but does not stop, the flow of foreign investment
- The USA maintains its precarious growth
- China posts growth above 7.5%, with counter-cyclical policies if necessary
Scenario II
Less likely but not impossible: Greece leaves the Euro Zone, spillover and a
Great Depression in EU countries, with negative repercussions for the USA,
China and the rest of the world economy (analogous to the crisis of 2008-2009)
Probable scenario: The world economy maintains
growth in 2012, although at lower rates…
GROSS DOMENSTIC PRODUCT BY REGIONS
Real growth rates, 2006-2012e
(Percentages)
Source: UN/DESA, based on official figures.
a
Estimation.
…but uncertainty and turbulence increase
SELECTED EUROPEAN COUNTRIES
FIVE YEAR RISK PREMIUMS 2009-2012
(Credit Default Swaps, in basis points)
Source: Bloomberg.
2. Internal Performance
The slowdown observed in 2011
moderated in the first quarter of 2012
LATIN AMERICA AND THE CARIBBEAN: GROSS DOMESTIC PRODUCT
(Rates of change with relation to the previous quarter, data with seasonal adjustments, percentages)
2.0
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
I
II
III
2010
Source: ECLAC, based on official figures.
IV
I
II
III
2011
IV
I
2012
The tendencies at the country level
are mixed…
LATIN AMERICA: ECONOMIC ACTIVITY INDICES
(Rates of change with relation to the previous quarter, data with seasonal adjustments)
4.0%
4.0%
3.0%
3.0%
2.0%
2.0%
1.0%
1.0%
Mexico /a
Argentina
Peru /a
Chile/a
0.0%
Venezuela
/a
Brazil /a
0.0%
Bolivia (Plur. St. of)
Costa Rica/b
-1.0%
Paraguay
-2.0%
-1.0%
Guatemala
/b
Panama
-2.0%
-3.0%
I
II
III
2011
IV
I
-3.0%
I
II
2012
Source: ECLAC, based on official figures
a Refers to the quarterly GDP rate. b Refers to the behaviour of the trend-cycle index.
III
2011
IV
I
2012
Inflation continued its downward trend:
Lower increase in food prices
LATIN AMERICA: CPI AND CONTRIBUTIONS TO INFLATION
(Twelve month rates of change, simple average)
Source: ECLAC, based on official figures
Even with this trend, in some cases the inflation rates still
remain in double digits
LATIN AMERICA AND THE CARIBBEAN: CONSUMER PRICE INDEX
(Twelve month rates of change, simple average)
(Brazil, Colombia, Chile, Mexico and Peru)
(Bolivia, Ecuador, Trinidad and Tobago and Venezuela)
(Argentina, Paraguay and Uruguay)
Fuente: ECLAC, based on official figures.
The tendency of a reduction in unemployment
continues in most countries
LATIN AMERICA (10 COUNTRIES): EMPLOYMENT AND UNEMPLOYMENT RATES
First quarter of 2008 to the first quarter of 2012, 4-quarter moving average
Source: ECLAC, based on official figures
…but employment growth shows differring
tendencies at the country level
LATIN AMERICA (SEVEN COUNTRIES): INTER-ANNUAL GROWTH IN EMPLOYMENT
COVERED BY SOCIAL SECURITY
(Growth rates, fourth quarter of 2008 – first quarter of 2012)
Fuente: ECLAC, based on official figures.
Moderate increases in real salaries predominate in
the region
GROWTH IN FORMAL SECTOR AVERAGE REAL SALARIES
(Inter-annual growth rates, percentages)
7.0
6.0
5.0
4.0
Growth Rate
3.0
2.0
1.0
0.0
-1.0
-2.0
-3.0
-4.0
2010-Q1
2010-Q2
2010-Q3
Brazil
Source: ECLAC, based on official figures.
2010-Q4
Chile
2011-Q1
Mexico
2011-Q2
Nicaragua
2011-Q3
Uruguay
2011-Q4
2012-Q1
3. External trade and capital
flows
The deterioration in the prices of primary
products moderated or even reversed
LATIN AMERICA: INDICES OF THE PRICES OF PRIMARY PRODUCTS AND MANUFACTURED GOODS
FOR EXPORT, 2009-2012
(2005=100, moving average of three months)
Source: ECLAC, based on official figures.
Export growth of countries within the region
slowed
LATIN AMERICA: INTER-ANNUAL RATE OF CHANGE IN THE VALUE OF EXPORTS 2011-2012
(Percentages, simple averages for the groupings)
45
40
35
30
25
20
15
10
5
0
Quarter 1
Quarter 2
Quarter 3
Quarter 4
2011
Quarter 1
2012
Latin America
Central America, Dominican Republic and Haiti /a
The Caribbean
Financially integrated countries
South American Agro-industrial exporting countries
Net hydrocarbon exporting countries
Source: ECLAC, based on official figures
a/ The data for Central America for the first semester does not include Haiti, Panama or the Dominican Republic.
Import growth also slowed, although
less so than export growth
LATIN AMERICA: INTER-ANNUAL RATE OF CHANGE OF THE VALUE OF IMPORTS 2011-2012
(Percentages, simple average for the groupings)
45
40
35
30
25
20
15
10
5
0
Quarter 1
Quarter 2
Quarter 3
Quarter 4
2011
Quarter 1
2012
Latin America
Central America, Dominican Republic, Haiti /a
The Caribbean
Financially integrated countries
South American Agro-industrial exporting countries
Net hyrocarbon exporting countries
Source, ECLAC, based on official figures
a/ The data for Central America for the first quarter of 2012 does not include Haiti, Panama, or the Dominican Republic
Exports to Europe have tended to fall
COUNTRIES WITH THE GREATEST PROPORTION OF EXPORTS TO EUROPE:
INTER-ANNUAL RATES OF CHANGE IN THE VALUE OF EXPORTS TO THE EUROPEAN
UNION, FIRST QUARTER 2012
(Percentages)
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
Total
EU
Argentina
Total
EU
Brazil
Source: ECLAC, based on official figures
Total
EU
Chile
Total
EU
Costa Rica
Total
Uruguay
EU
There was a moderate increase in the flow
of workers’ remittances
LATIN AMERICA AND THE CARIBBEAN (7 COUNTRIES): RATE OF CHANGE OF INCOME FROM WORKERS’
REMITTANCES, 2011-2012
(Rates of change with relation to the same quarter of the previous year, percentages)
Nicaragua
El Salvador
Guatemala
Mexico
Jamaica
Honduras
Colombia
Ecuador
-10%
-8%
-6%
-4%
-2%
Source: ECLAC, based on official figures
0%
2%
Q12011
2011
1Q
4%
6%
Q12012
2012
1Q
8%
10%
12%
14%
16%
18%
Tourism grew moderately in the region, with some
recovery in the Caribbean
LATIN AMERICA AND THE CARIBBEAN: CHANGE IN INTERNATIONAL TOURIST ARRIVALS: 2010-2012
(Rates of change with relation to the same quarter of the previous year, percentages)
Guyana
Suriname
Saint Vincent and the Grenadines
Belize
Antigua and Barbuda
Bahamas
Barbados
Jamaica
Dominica
Ecuador
33.6%
Chile
Costa Rica
Dominican Republic
Cuba
Mexico
40.7%
Uruguay
-10%
-5%
0%
Q1 2011
1Q
2011
Source: ECLAC, based on official figures.
5%
Q1 2012
2012
1Q
10%
15%
20%
25%
During the first quarter of 2012 the region
maintained easy access to international capital
markets
LATIN AMERICA: EXTERNAL BOND EMISSIONS AND COUNTRY RISK
(In millions of dollars and basis points)
Source: ECLAC, based on official figures
4. Macroeconomic policy
During the first quarter of 2012 the growth of tax
income slowed in various countries
LATIN AMERICA (12 COUNTRIESa): TOTAL TAX COLLECTION
(Real rate of change with respect to the same quarter of the previous year, simple average))
35
30
25
1Q
Q12011
2011
1Q
Q12012
2012
20
15
10
5
0
-5
Source: ECLAC, based on official figures
Note: a/ Contributions to social security are not included, and in Mexico only non-oil related tax revenues are included.
Spending varied widely in the region, with spending
outpacing revenues in some countries
LATIN AMERICA AND THE CARIBBEAN (11 COUNTRIES): PERCENTAGE VARIATION OF REAL FISCAL
EXPENDITURES AND REVENUES: FIRST QUARTER OF 2012 COMAPRED TO THE SAME PERIOD OF THE
PREVIOUS YEAR
-15.0
-10.0
-5.0
0.0
5.0
10.0
Guatemala
Peru
Trinidad and Tobago
Costa Rica
Brazil
Bolivia (Plur. St. of)
Chile
Mexico
Argentina
Colombia
Uruguay
Total Revenue
Source: ECLAC, based on official figures
Total Expenditure
15.0
20.0
25.0
30.0
Various countries pushed forward with complicated
processes of tax reform
(IV quarter of 2011 and I quarter of 2012)
Country
Ecuador
Reform Characteristics
- Environmental tax on vehicle contamination and bottles and
plastic bags.
- Higher rates on cigarettes, alcohol and foreign exchange
outflows.
- Income tax reform, including:
El Salvador
- An increase in the income tax on legal persons from 25%
to 30%,
- Establishment of a minimum tax of 1% on gross income.
- Income tax reform, including:
- Control of costs and deductible spending,
Guatemala
- Application of a 5% tax rate on dividends.
- Creation of a tax on registering vehicles and an increase in
the vehicle circulation tax.
Source: ECLAC, based on official figures.
Various tax reforms have been proposed and
are in the process of being debated in the
legislature
Country
Reforms in Progress
The Tax Solidarity Law project:
Costa Rica
- Modification of the income tax, unifying the existing tax rates at
15%.
- Transforming sales taxes to a VAT.
Paraguay
Personal income tax: Approved in the lower house of congress and
pending approval in the senate
Tax Reform Law project
- Increase in the taxes on businesses.
Chile
- Reduction in the education burden on families.
- Fighting evasion, elimination of unjustified extensions and other
incentives.
Tax Reform project ELISSA:
Colombia
- Even out the currently existing inequities in tax and fiscal matters.
- Reduce tax evasion.
Source: ECLAC, based on official figures
Monetary policy: there were few changes in
interest rates
LATIN AMERICA: MONETARY POLICY RATES
(Percentages)
16.00
14.00
12.00
10.00
Argentina
Mexico
Peru
8.00
Dominican Republic
Trinidad and Tobago
6.00
ECCU (Caribbean)
4.00
2.00
0.00
Oct-11
Nov-11
Source: ECLAC, based on official figures.
Dic-11
Dec-11
Ene-11
Jan-12
Feb-12
Mar-12
Monetary policy: there were few changes in
interest rates
LATIN AMERICA: MONETARY POLICY RATES
(Percentages)
14.0
12.0
10.0
8.0
6.0
4.0
2.0
Oct-11
Brasil
Nov-11
Uruguay
Source: ECLAC, based on official figures.
Dec-11
Dic-11
Honduras
Jan-12
Ene-11
Colombia
Chile
Feb-12
Bolivia
Mar-12
International reserves adjusted to avoid exchange
rate volatility
LATIN AMERICA AND THE CARIBBEAN: INTERNATIONAL RESERVES
(Changes in the quarterly averages)
Source: ECLAC , based on official figures.
During the first quarter of 2012 a tendency of
moderate appreciation in the exchange rates
dominated
EXTRA-REGIONAL REAL EFFECTIVE EXCHANGE RATE
(Base 2005=100)
105
100
Dollarized Economies
95
The English-Speaking Caribbean
90
85
Central America and the Dominican
Republic
80
Financially integrated countries
75
Source: ECLAC, based on official figures
I 2012
IV 2011
III 2011
II 2011
I 2011
IV 2010
III 2010
II 2010
70
I 2010
South American agro-industrial
exporting countries
Net hyrdocarbon exporting countries
Even though depreciations in national currencies
have been observed in recent months
BILATERAL DOLLAR EXCHANGE RATES
(December 2010 = 100)
80.00
85.00
90.00
95.00
Brazil
Chile
100.00
Colombia
Paraguay
105.00
Peru
Uruguay
110.00
115.00
Source: ECLAC, based on official figures.
May-12
Apr-12
Mar-12
Feb-12
Jan-12
Dec-11
Nov-11
Oct-11
Sep-11
Aug-11
Jul-11
Jun-11
May-11
Apr-11
Mar-11
Feb-11
Jan-11
120.00
5. Perspectives for 2012 and
2013
Two scenarios:
1. Base scenario
2. Scenario of crisis and contagion in
Europe
Base scenario: Economic activity continues to
expand (by 3.7%), but does not reach the same
rate as in 2011
LATIN AMERICA AND THE CARIBBEAN GDP GROWTH RATES, 2012 (%)
Panama
Haiti
Peru
Bolivia
Venezuela
Nicaragua
Costa Rica
Chile
Dominican Republic
Ecuador
Colombia
Mexico
Latin America
Latin America and the Caribbean
Uruguay
Guatemala
Argentina
Honduras
Cuba
Brazil
El Salvador
The Caribbean
Paraguay
6.0
5.7
5.2
5.0
5.0
5.0
4.9
4.5
4.5
4.5
4.0
3.7
3.7
3.5
3.5
3.5
3.2
3.0
2.7
2.0
1.9
-1.5
-2
Source: ECLAC
8.0
0
2
4
6
8
Base scenario: The Caribbean
THE CARIBBEAN: GDP GROWTH RATES, 2012 (%)
Suriname
4.3
Guyana
4.1
Belize
3.0
Bahamas
2.8
Dominica
2.6
Antigua and Barbuda
2.3
Saint Lucia
2.1
Grenada
1.9
The Caribbean
1.9
Saint Vincent and the Grenadines
1.8
Trinidad and Tobago
1.7
Saint Kitts and Nevis
1.0
Jamaica
1.0
1.0
Barbados
0
Source: ECLAC.
1
2
3
4
5
6
7
8
The (less likely) crisis scenario:
 There are spillovers to the other large economies of the EU
 “Flight to quality or safety” of the financial flows → exchange rate





volatility and less access for the region’s countries to external
financing.
An increase in the liquidity needs in LAC, particularly in foreign
exchange.
A fall in the prices of primary products → a greater deterioration in
the terms of trade.
Less external demand for the products exported from the region,
due to lower European demand for imports as well as lower
demand in other regions → negative impact on economic activity.
Lower remittances and less tourism.
A deterioration in the fiscal accounts due to a reduction in fiscal
revenue, especially for those countries that export primary products.
Final reflections



The region ended the economic slowdown that began in the second
half of 2011, but with mixed results
The region continues to grow, based on the expansion of domestic
demand (consumption and investment)
In the face of the uncertain international situation
– A prudent and cautious macroeconomic policy stance is justified
– A strengthening of counter-cyclical policies is justified (different from
country to country) in order to avoid a period of slower growth
(deterioration of the first scenario that could lead to scenario II)

The region has the capacity to respond to a deteriorating situation:
– Inflation is low
– International reserves are high
– Public debt, both external and internal, is low (with the exception of the
Caribbean)
– Countries have rebuilt fiscal space (although not to the levels that existed
before the crisis of 2008-2009), and
– A growing experience with effective macro-prudential policies exists.