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This document summarizes key points from a presentation on navigating the global economy given by Angel Melguizo of the IDB. It discusses Latin America's current economic challenges, including low growth in 2015 and a slow cyclical recovery expected in 2016. It also notes heterogeneity between countries and that exiting the slowdown will not be fast. The presentation emphasizes the key role of fiscal policy, including both spending and improving low tax collection rates. It raises open questions around skills development, political will for reforms, and increasing regional economic integration.
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- 1. Comments on The Labyrinth How can Latin American and the Caribbean navigate the global Economy (IDB) Angel Melguizo Head of the Latin American and Caribbean Unit Joint Seminar OECD and Paris School of Economics Paris, June 9 2015
- 2. Latin American Economic Outlook 1 Latin America and the Caribbean in the Report Our view of Latin America and the Caribbean2 Latin America – Comments on The Labyrinth, IDB Macro Report Open questions3 It’s a defining moment ‘Americas Latinas’ Key role of fiscal policy (taxes & expenditure)
- 3. Defining moment 3 Source: Powell (2015), The labyrinth. How can Latin America and the Caribbean navigate the global economy. IDB Macro Report
- 4. Americas Latinas 4 Source: Powell (2015), The labyrinth. How can Latin America and the Caribbean navigate the global economy. IDB Macro Report
- 5. Fiscal policy is key 5 Source: Powell (2015), The labyrinth. How can Latin America and the Caribbean navigate the global economy. IDB Macro Report
- 6. Latin American Economic Outlook 1 Latin America and the Caribbean in the Report Our view of Latin America and the Caribbean2 Latin America – Comments on The Labyrinth, IDB Macro Report Open questions3 It’s a defining moment ‘Americas Latinas’ Key role of fiscal policy (taxes & expenditure)
- 7. Defining moment External and internal factors depict a poor 2015, and a cyclical recovery in 2016 7 GDP growth in Latin America and the OECD (annual %) Source: OECD-CAF-ECLAC (2014), Latin American Economic Outlook 2015. Education, skills and innovation for development. Update using ECLAC for 2000-2015 and Consensus Forecasts (May 2015) for 2016 -4 -2 0 2 4 6 8 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 % OECD Latin America and the Caribbean
- 8. Source: OECD data and forecasts in OECD Economic Outlook (June 2015) and Consensus (May 2015) for Venezuela)8 Americas Latinas Country heterogeneity in growth forecasts… GDP growth in selected LAC economies (annual %) -8 -6 -4 -2 0 2 4 6 8 Argentina Brazil Chile Colombia Costa Rica Mexico Peru Venezuela 2002-2013 2014 2015 2016
- 9. 9 Americas Latinas … so the ‘Latin American’ cycle is everywhere Source: OECD Development Centre, using OECD Economic Outlook (June 2015) and IMF World Economic Outlook (April 2015) Cyclical position of Latin American economies in 2015 (deviation from trend using HP filter) Argentina The Bahamas Barbados Bolivia Brazil Chile Colombia Costa Rica Dominican Republic Ecuador El Salvador Guatemala Honduras Jamaica Mexico Nicaragua Panama Paraguay Peru Trinidad and Tobago Uruguay Venezuela -0.04 -0.03 -0.02 -0.01 0 0.01 0.02 0.03 0.04
- 10. 10 … although exiting the slowdown will not be fast in any case. Way out? Source: OECD Development Centre, using OECD Economic Outlook (June 2015) and IMF World Economic Outlook (April 2015) Cyclical position of selected Latin American economies, 2015-2017 (deviation from trend using HP filter) Argentina Colombia Peru Chile Costa Rica Brazil Mexico Venezuela -0.1 -0.08 -0.06 -0.04 -0.02 0 0.02 0.04 0.06 0.08 0.1
- 11. Fiscal policy is key - More than revenues Good progress in macro-management (with caveats)… 11 Discretionary fiscal policy and output gap in selected Latin American economies (output gap coefficient) Source: Alberola et al. (2015), “Fiscal policy and the cycle in Latin America: The role of financial conditions and fiscal rules”, Bank of Span Working Paper, forthcoming -0.8 -0.6 -0.4 -0.2 0 0.2 0.4 0.6 Argentina Brazil Chile Colombia Costa Rica Mexico Peru Uruguay 1991-2001 2002-2013
- 12. Fiscal policy is key - More than revenues … although tax collection remains (too) low in many countries 12 Tax revenues in Latin America and the OECD (%GDP, 2013) Source: OECD-ECLAC-CIAT (2015), Revenue Statistics in Latin America 1990-2013 0 10 20 30 40
- 13. Latin American Economic Outlook 1 Latin America and the Caribbean in the Report Our view of Latin America and the Caribbean2 Latin America – Comments on The Labyrinth, IDB Macro Report Open questions3 Skills Political economy of (fiscal) reforms Integration
- 14. Low trust, but also higher aspirations How to face this defining moment in challenging political times? 1414 Source: OECD Development Centre, IDB and Tulane University project. The emerging middle class and Commitment to Equity in Latin America. 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 URY CRI BRA MEX COL PER BOL SLV GTM Vulnerable Middle class Informality in middle income households in selected Latin American economies (% households without contributing members, circa 2010)
- 15. Latin America in Shifting Wealth: more an spectator than an actor (Not enough) Integration – Are alliances the way forward? Contribution to global growth (%) 50% 19% 8% 4% 1% 18% 1990-1995 32% 41% 9% 6% 3% 9% 2005-2012 Economies avancées Asie émergente Amérique latine Moyen Orient et Afrique du Nord Afrique subsaharienne Reste du monde Source: OECD-CAF-ECLAC (2013), Latin American Economic Outlook 2014. Logistics and competitiveness for development 15
- 16. 16 Proportion of firms that consider the lack of labour force with the adequate skills a significant restriction to growth (% formal firms) LAC shows the largest skill gap, notably automotive & manufacturing What works? More PPPs? Source: OECD/ECLAC/CAF (2014), Latin American Economic Outlook 2015. Education, skills and innovation for development.
- 17. 17 Estimated future’s share in services (%) Challenge which will increase in the Shifting Wealth 2.0 world Cooperate or compete? Source: OECD/ECLAC/CAF (2015), Latin American Economic Outlook 2016. LatAm and China: Partners for development, forthcoming, DRC/WB (2013), China 2030: Building a Modern, Harmonious, and Creative Society and OECD (2015) Economic Survey for China Enrolment rates in secondary education (%) 0 20 40 60 80 100 120 1970 1980 1990 2000 2010 % OECD average LAC China
- 18. Visit http://www.iadb.org/en/research-and-data Joint Seminar OECD and Paris School of Economics Paris, June 9 2015
Editor's Notes
- -OECD data and forecasts in OECD Economic Outlook 2015. -Aggregate LAC data and forecasts in CEPALSTAT and “Balance Preliminar de las Economías de América Latina y el Caribe” (ECLAC, 2014).
- Us cycle
- -OECD data and forecasts in OECD Economic Outlook 2015. -Aggregate LAC data and forecasts in CEPALSTAT and “Balance Preliminar de las Economías de América Latina y el Caribe” (ECLAC, 2014).
- LAC18 Consensus Forecasts: Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Républica Dominicana, Ecuador, El Salvador, Guatemala, Honduras, México, Nicaragua, Panamá, Paraguay, Perú, Uruguay y Venezuela LAC33 CEPAL: Antigua y Barbuda, Argentina, Bahamas, Barbados, Belice, Bolivia, Brasil, Chile, Colombia, Costa Rica, Cuba, Dominica, Ecuador, El Salvador, Granada, Guatemala, Guyana, Haití, Honduras, Jamaica, México, Nicaragua, Panamá, Paraguay, Perú, República Dominicana, Saint Kitts y Nevis, Santa Lucia, Suriname, Trinidad y Tobago, Uruguay, Venezuela.
- -OECD data and forecasts in OECD Economic Outlook 2015. And Consensus (Venezuela)
- En República Dominicana los niveles de renta per cápita en términos reales han mostrado un estancamiento muy acusado hasta principios de los 90s. A partir de 1992 el país ha incrementado de forma sostenida su renta per cápita, pasando de USD 2 652 de 1990 en 1992 a 5 725 en 2013.