Robust growth in Andes, but CA deficits widening

Robust GDP growth in the Andes over the past year or so has been a rare piece of good news in Latin America, but in Chile and Colombia’s case, this has come alongside growing external vulnerabilities. Recently-released figures show that current account deficits in both countries widened in Q4 and now stand at 3.1% and 3.7% of GDP, respectively. These deficits aren’t as large as the 6-7% of GDP shortfalls that helped to trigger last year’s currency crises in Turkey and Argentina. But the trajectory of both deficits is a concern, and is one reason why we expect the Chilean and Colombian pesos to weaken further over the course of this year.