Economic Snapshot for Latin America

July 15, 2020

The fast-spreading Covid-19 pandemic is set to push the region into its deepest recession in modern history this year

The economic outlook for Latin America, which is now the global epicenter of the coronavirus pandemic, was downgraded yet again this month. Lockdowns at home and the global recession will pummel economies through various channels including lower trade, commodity prices, tourism activity, remittances and domestic demand.

Latin America Monetary & Financial Sector News

Inflation in Latin America inched up to 5.9% in June from 5.8% in May, which had marked a two-year low. Higher inflation in Brazil and Mexico, mainly owing to recovering energy prices, drove the uptick. Economic slack has kept inflation broadly in check in most countries. Regional inflation is expected to ease from current levels going forward, largely on muted demand.

The central banks of Brazil, Colombia and Mexico slashed their policy rates yet again in recent weeks in a bid to further shield their economies from the Covid-19 fallout. Meanwhile, policymakers in Chile and Peru opted to leave benchmark rates steady at their multi-year lows. Central bankers overall are seen cutting rates further by year-end.

The vast majority of the region’s currencies lost ground against the USD over the past month, with the Brazilian real especially battered due to the alarming state of soaring Covid-19 cases in the country. The Colombian peso was the only currency which strengthened against the greenback. Currencies are projected to weaken much more sharply this year compared to 2019.