Government spending, not consumption, will fuel Latin America’s economic recovery, ratings agency says
Published by Anadolu Agency, 24 Sept.
Latin America’s consumer-led economic growth during the last decade that raised millions out of poverty and spurred the rise of a robust middle class is now tapering off and could threaten certain industries, Moody’s Investment Services said Tuesday.
“We are forecasting that growth in Argentina, Brazil, Chile and Peru will fall below each country’s average growth rate experienced during the 2004-13 period,” said the New York-based ratings agency in a report.
“While we expect growth (other than in Argentina) to accelerate somewhat in 2015, consumers will not be leading the recovery,” Moody’s said, adding that government spending, instead, would drive regional growth.
Retailers, homebuilders, airlines, and automakers are among those set to suffer, as a consumer slowdown and cooling credit reduces demand.
The insurance sector would be “most negatively affected,” having surged in the past decade on “rising incomes and increased concern among the population about the future adequacy of social security programs.”
Latin America’s middle class expanded by 50 percent in the last decade, according to the World Bank. The group now makes up more than a third of the region’s population of 600 million, and by 2016 will surpass the size of the region’s poor for the first time.
Mexico, Peru and Colombia are expected to grow on boosted state spending.
Argentina’s economy contracted 0.2 percent compared to a year earlier, from January to April.
The United Nation’s Economic Commission for Latin America and the Caribbean (ECLAC) expects 2.2 percent growth in the region in 2014, having cut by half a 4.5 percent estimate made last December.