Slowdown underway

Latin American economies held up well in early part of this year, helped by the surge in commodity prices brought about by the war in Ukraine. But there are signs that activity is now weakening. Timely monthly activity indices fell in m/m terms in five of the six major economies in May as high inflation and tight monetary policy have started to take their toll. And we expect growth to slow further over the coming quarters. The surprising exception was Argentina, whose economy expanded in May. But this will almost certainly be temporary as the political crisis that exploded this month has caused strains in the country’s balance of payments to intensify.