Summary
Although Latin America is not immune to the effects of the global economic crisis, the region is likely to suffer a smaller output decline and recover sooner than the advanced economies because Latin American countries in the main have run sound fiscal and financial policies, the director of the IMF’s Western Hemisphere Department said.
Analysis
In fact, the worst of the downturn appears to be behind the region. Most economies in Latin America should turn around and begin to grow this quarter or next. The IMF estimates that growth in the United States and Europe will not resume until 2010 and only then if the advanced economies take serious steps to cleanse bank balance sheets of toxic assets.
The answer is yes. Brazil becomes the first country in Latin America to emerge from the recession that resulted from the worldwide global financial crisis, which reached new heights with the collapse of U.S. investment bank Lehman Brothers nearly a year ago.
Brazil's return to growth After GDP contractions of 3.6% and 1.8% in the fourth quarter of 2008 and the first quarter of 2009, respectively, Brazil expansion of nearly 2% in the second quarter marks the end of the country's first recession since 2003.
Domestic demand in the quarter rose 3.2% from the year-ago period. Declines in rates offered at banks and other financial institutions also aided the economy.
The government's stimulative measures were among the cheapest programs in the world, adding that they will cost 1% to 1.5% of GDP. Aimed at pulling the economy through the crisis will end this year.
Brazil expects GDP growth between 2% and 3% in the fourth quarter, and to end 2009 with an expansion rate of 1%.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
