The International Credit Rating Agency Fitch Ratings has projected regional GDP —excluding that of Venezuela— will see a modest cyclical recovery of 2.6% in 2018, up from 1.7% in 2017.
This positive result would be underpinned by the recovery in
commodity prices, as well as better external and domestic demand, the agency noted in its "Latin American Sovereign Overview 2Q18."
"However, structural hindrances may restrain growth below prior peaks," it added.
Fitch Ratings also pointed out moderate growth in
commodity-producing countries highlights continuing challenges in terms of productivity and economic diversification.
Additionally, the lack of significant progress on measures "to hasten fiscal consolidation or boost growth potential means that downside risks to the economic and fiscal outlooks remain present," it underlined.
"The government debt burden is still increasing in several countries," the report noted.
LatAm elections
Factors such as the slow growth, corruption, legislative gridlocks, and —in some cases— an increase in crime have frustrated voters in many countries.
For that reason, anti-establishment candidates are doing well in the polls in some countries (e.g. Mexico and Brazil), Fitch Ratings explained.
It must be noted this agency will be monitoring the coming elections in Brazil, Colombia, Mexico, Paraguay, and Venezuela in order to assess their implications for economic policies and sovereign creditworthiness.
Rating outlook
The rating outlooks for most Latin American countries are currently stable, while three are positive (Argentina, Jamaica, and Paraguay), and two are negative (Costa Rica and Ecuador).
As is known, Fitch recently downgraded Brazil's ratings with a stable outlook. On the other hand, Venezuela remains in restricted default.
Other negative actions since the previous Latin American Sovereign Overview include the revision of the outlook on Costa Rica to negative from stable.
"Positive actions include the revision of Suriname's outlook to stable from negative," it concluded.
(END) NDP/JAA/MVB