20170811-法国巴黎银行-Latin_America_Week_Ahead_11页_190kb

Latin America Weekly Market Summary - 11 August 2017

Core Content Overview

This report provides a market outlook for Latin America, focusing on economic activity, political developments, and monetary policy decisions across key countries: Brazil, Mexico, Colombia, Chile, and Argentina. It highlights upcoming data releases, political events, and potential market impacts.

Key Events and Market Focus

Brazil

• Economic Focus: Expected to release positive-to-flat activity data for June, with retail sales and monthly GDP proxy results likely to increase market confidence in the end of the recession, though recovery remains weak.
• Political Focus: Congress is shifting attention to political reform due to upcoming elections, and social security reform is likely to take center stage in the near future.
• Fiscal Outlook: Updated fiscal targets for 2017 and 2018 are expected. The primary target is projected to increase from BRL 139bn to USD 159bn due to poor tax collections.
• Monetary Policy: No significant rate changes are expected from the Central Bank of Brazil (BCB) in the short term. The policy rate is forecast to remain at 2.50% by year-end.
• Key Releases:
  • June Retail Sales (m/m): Expected to show flat growth at 0.1%.
  • June Retail Sales (y/y): Projected at 0.9%.
  • Q2 GDP (y/y): Anticipated to grow at 1.2%.
  • Q2 GDP (q/q): Projected at 0.5%.
  • Economic Activity Index (y/y): Expected to rebound to 1.6%.
• Growth Outlook: 2018 growth is anticipated at 3.0%, up from 0.5% in 2017, but the annual GDP expansion is still below potential at 1.5%.

Mexico

• Key Event: The formal restart of NAFTA renegotiation talks on Wednesday.
• Market Impact: The talks are expected to focus on wage adjustments, dispute mechanisms, and rules of origin, with a likely outcome of a modest upgrade rather than a complete dismantling.
• Political Outlook: The 2018 general election is on the horizon, and a potential PAN-PRD coalition could strengthen the opposition and support local markets.
• Economic Focus: No major economic data releases are scheduled for the week.

Colombia

• Main Event: Q2 GDP release on Tuesday, likely to reflect a difficult recovery with weak consumption and production.
• Growth Forecast: 1.2% y/y growth for Q2, down from the 2% average in 2016, due to oil price pressures.
• External Sector: Improved terms of trade and exports could support a marginal improvement in economic activity.
• Key Releases:
  • June Industrial Production (y/y): Expected at -1.5%.
  • June Retail Sales (y/y): Projected at 0.8%.
  • Q2 GDP (y/y): Forecast at 1.2%.
  • Q2 GDP (q/q): Anticipated at 0.5%.
  • Q2 Current Account Balance: Expected to show a USD-0.7bn deficit.
• Growth Outlook: Weak performance in H1, with a slight improvement expected in H2, averaging 2.1% growth.

Chile

• Monetary Policy: The Central Bank of Chile (BCCh) is expected to keep interest rates on hold, contrary to some market expectations.
• Inflation Outlook: June deflation concerns were dispelled in July, with core inflation rising above the headline rate, and non-tradable inflation accelerating.
• Key Releases:
  • June GDP (y/y): Forecast at 1.5%.
  • June GDP (q/q): Projected at 0.8%.
  • Q2 Current Account Balance: Expected to show a USD-1.0bn deficit.
• Growth Outlook: Chile is expected to show a sharp growth acceleration in Q2, with real GDP growth likely to rise from 0.1% in Q1 to 1.5% in Q2.

Argentina

• Key Event: Sunday's primary elections (PASO) will dominate attention, especially the senator race in Buenos Aires.
• Political Outlook: Former President Cristina Kirchner is expected to lead in the primary, though the margin over the runner-up (Esteban Bullrich) will be key in interpreting the results.
• Market Impact: A narrow margin could signal continued support for President Macri's reform agenda, while a wide gap might suggest a more transitory shift in economic policies.
• No Economic Data Releases: The week is focused entirely on political developments.

Main Views and Key Information

Economic Recovery Trends

• Brazil: Recovery is expected to be weak, with a return to positive retail sales but no strong rebound in GDP or industrial production.
• Colombia: The economy is still in a lethargic state, with weak consumption and production. The external sector is expected to provide limited support.
• Chile: Growth is expected to accelerate in Q2, with inflation rising and the central bank likely to maintain a cautious stance on monetary policy.

Political Developments

• Brazil: Congress is shifting focus to political reform, with no immediate emphasis on social security reform.
• Mexico: Political alliances are forming ahead of the 2018 election, with a potential PAN-PRD coalition to strengthen the opposition.
• Argentina: The PASO results will be crucial for interpreting the popularity of the reform agenda and the future of the ruling coalition.

Monetary Policy Outlook

• Brazil: BCCh is expected to remain on hold, with no additional easing in 2017.
• Chile: BCCh is expected to maintain its current policy rate, with potential tightening in 2018 as the economy gains momentum.

Economic Calendar Highlights (14 Aug – 18 Aug)

Market Outlook Summary

• Brazil: Weak recovery expected, with positive retail sales and GDP data, but no robust growth.
• Mexico: NAFTA renegotiations will dominate the week, with a focus on upgrading the agreement.
• Colombia: Continued weak growth and consumption, with limited external sector support.
• Chile: Central bank likely to maintain interest rates on hold, with signs of improving inflation and growth.
• Argentina: Political results will be the main focus, with implications for the reform agenda and market sentiment.

Conclusion

The week ahead is marked by a mix of economic data and political developments. While economic activity is expected to show some improvement, especially in Brazil and Chile, the recovery remains fragile. Mexico's NAFTA discussions and Argentina's primary elections will likely have the greatest impact on market sentiment. The central banks of Brazil and Chile are expected to maintain a cautious stance, with no immediate rate changes anticipated.