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International Monetary FundOctober 2017
Alejandro WernerDirector
Western Hemisphere Department
Global, Regional, and Peru Outlook
I. Global Outlook
II. LAC OutlookIII. Peru
WorldAdvancedEconomies U.S. U.K. Japan Euro Area Germany Canada
Other Advanced
Asia
2016 3.2 1.7 1.5 1.8 1.0 1.8 1.9 1.5 2.3
2017 3.6 2.2 2.2 1.7 1.5 2.1 2.0 3.0 2.6
Revision from Jul.
20170.1 0.2 0.1 0.0 0.2 0.2 0.2 0.5 0.1
2018 3.7 2.0 2.3 1.5 0.7 1.9 1.8 2.1 2.7
Revision from Jul.
20170.1 0.1 0.2 0.0 0.1 0.2 0.2 0.2 0.0
Source: IMF, World Economic Outlook database. 3
World
Emerging Market and Developing Economies China India Brazil Russia
Commodity ExportingEconomies
Sub-Saharan Africa
2016 3.2 4.3 6.7 7.1 –3.6 –0.2 1.5 1.4
2017 3.6 4.6 6.8 6.7 0.7 1.8 2.3 2.6
Revision from July
20170.1 0.0 0.1 –0.5 0.4 0.4 0.1 –0.1
2018 3.7 4.9 6.5 7.4 1.5 1.6 2.9 3.4
Revision from July
20170.1 0.1 0.1 –0.3 0.2 0.2 0.1 –0.1
4Source: IMF, World Economic Outlook database.
5
42
44
46
48
50
52
54
56
58
60
42
44
46
48
50
52
54
56
58
60
15 16 17
Manufacturing PMI(>50=expansion)
United States
Euro area
JapanChina
Sep. 17-4
-2
0
2
4
6
8
10
-4
-2
0
2
4
6
8
10
15 16 17 Aug. 17
Industrial Production (% year-on-year)
United States
Euro area
Japan
China
Sources: IMF, Global Data Source database; and IMF staff calculations.
92
94
96
98
100
102
104
106
108
110
112
92
94
96
98
100
102
104
106
108
110
112
15 16 17 Sep. 17
United States
Euro area
Japan
China
Consumer Confidence(Jan. 2015=100)
6
0
10
20
30
40
50
60
70
80
90
100
0
10
20
30
40
50
60
70
80
90
100
07 08 09 10 11 12 13 14 15 16 17
Population
PPP weight
Share of Countries with an Acceleration in Real GDP Growth (% of world ppp weight or world population)
Sources: IMF, World Economic Outlook database; and IMF staff calculations.
7
-1
0
1
2
3
4
5
6
7
8
9
-1
0
1
2
3
4
5
6
7
8
9
06 07 08 09 10 11 12 13 14 15 16 17
Aug. 17
Advanced Economies: CPI Inflation(% y-o-y)
Core CPI
Headline CPI
-1
0
1
2
3
4
5
6
7
8
9
-1
0
1
2
3
4
5
6
7
8
9
06 07 08 09 10 11 12 13 14 15 16 17
Aug. 17
Core CPI
Headline CPI
Emerging Economies: CPI Inflation(% y-o-y)
Source: IMF, Global Data Source database.
8
Source: Thompson Reuters Datastream.
40
60
80
100
120
140
160
180
40
60
80
100
120
140
160
180
Jan-
07Se
p-07
May
-08
Jan-
09Se
p-09
May
-10
Jan-
11Se
p-11
May
-12
Jan-
13Se
p-13
May
-14
Jan-
15Se
p-15
May
-16
Jan-
17Se
p-17
GermanyUnited Kingdom
Japan
United States
Canada
Equity Indices (index: Jan-2008 = 100)
0
10
20
30
40
50
60
70
50
150
250
350
450
550
650
750
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
VIX (right scale)
Market risk + Term premium (bps)
Source: Bloomberg L.P.
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
75th percentile
25th percentile
Mean
Total Debt to EBITDA, multiple(%)
Source: Bloomberg L.P.
Risk premiums and market volatility are compressed
Corporate leverage remains highEquity indices are at historic highs
I. Global Outlook
II. LAC OutlookIII. Peru
10
Sources: IMF, World Economic Outlook database; and IMF staff calculations.Note: Historical average refers to the average growth from 2000–13.
2017 LAC growth: 1.2%
2015 20172016 2018
2018 LAC growth: 1.9%
2015 LAC growth: 0.1%
2016 LAC growth: -0.9%
11
Sources: IMF, World Economic Outlook database; and IMF staff calculations.Note: Recession countries are Argentina, Belize, Brazil, Ecuador, Suriname, Trinidad and Tobago, and Venezuela. Pacific Alliance includes Chile, Colombia, Mexico, and Peru. Mercosur includes Argentina, Brazil, Paraguay, and Uruguay. LAC = Latin America and the Caribbean.
0
2
4
6
8
10
12
0
2
4
6
8
10
12
Brazil Chile Colombia Mexico Peru
Target rangePeak (Dec-2013 to Dec-2016)Latest (Sep-2017)
Inflation (12-m % change)
Sources: Haver Analytics; and IMF staff calculations.Note: Peak dates over the period December 2013 to December 2016 are: Brazil (January 2016); Chile (October 2014); Colombia (July 2016); and Mexico (January 2014); and Peru (January 2016).
The economic recovery expected a year ago is now a reality... … at the same time, inflation has been falling in most countries.
-4
-2
0
2
4
6
8
10
-4
-2
0
2
4
6
8
10
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Real GDP Growth (%)
LAC
LAC excl. countries in recession
Pacific Alliance
Mercosur
12
Real GDP Growth (%) CPI Inflation (end of period; %)Projections Projections
2014 2015 2016 2017 2018 2014 2015 2016 2017 2018
LAC 1.2 0.1 –0.9 1.2 1.9 5.0 6.2 4.6 4.2 3.6CAPDR 5.0 5.1 4.6 4.1 4.4 3.3 1.6 2.0 3.3 3.8Caribbean
Tourism-dependent 0.8 0.9 1.4 1.8 2.3 1.5 –0.3 0.5 2.9 2.2Commodity exporters 0.2 –0.4 –4.9 –1.9 2.0 3.3 6.1 14.5 4.3 5.1
Memorandum items:Argentina –2.5 2.6 –2.2 2.5 2.5 23.9 … … 22.3 16.7Brazil 0.5 –3.8 –3.6 0.7 1.5 6.4 10.7 6.3 3.6 4.0Chile 1.9 2.3 1.6 1.4 2.5 4.7 4.4 2.8 2.4 2.9Colombia 4.4 3.1 2.0 1.7 2.8 3.7 6.8 5.7 4.0 3.1Mexico 2.3 2.6 2.3 2.1 1.9 4.1 2.1 3.4 6.1 3.5Peru 2.4 3.3 4.0 2.7 3.8 3.2 4.4 3.2 2.7 2.5Uruguay 3.2 0.4 1.5 3.5 3.1 8.3 9.4 8.1 6.2 6.7
Sources: IMF, World Economic Outlook database; and IMF staff calculations.Note: Real GDP growth aggregates are PPP GDP-weighted. LAC inflation is geometric average excluding Argentina and Venezuela. Other inflation regional aggregates are simple averages.
13
20
40
60
80
100
120
140
20
40
60
80
100
120
140
Jan-
08
Oct
-08
Jul-0
9
Apr-
10
Jan-
11
Oct
-11
Jul-1
2
Apr-
13
Jan-
14
Oct
-14
Jul-1
5
Apr-
16
Jan-
17
Oct
-17
Chile
Mexico
Colombia
Peru
Brazil
Equity Indices (index: Dec-2010 = 100)
Sources: Bloomberg L.P.; and IMF staff calculations.
100
200
300
400
500
600
100
200
300
400
500
600
Jan-
08
Oct
-08
Jul-0
9Ap
r-10
Jan-
11O
ct-1
1
Jul-1
2Ap
r-13
Jan-
14O
ct-1
4Ju
l-15
Apr-
16
Jan-
17O
ct-1
7
EMBIG Spreads(basis points)
Chile
Mexico
Colombia
Peru
Brazil
40
55
70
85
100
115
130
145
40
55
70
85
100
115
130
145
Jan-
08
Oct
-08
Jul-0
9
Apr-
10
Jan-
11
Oct
-11
Jul-1
2
Apr-
13
Jan-
14
Oct
-14
Jul-1
5
Apr-
16
Jan-
17
Oct
-17
Bilateral Exchange Rates, US$/NC(index: Jan-2012 = 100)
Chile
Mexico
Colombia
Peru
Brazil
Sources: Bloomberg L.P.; and IMF staff calculations.Source: Bloomberg L.P.
Equity prices have rebounded from recent lows… … and recent currency depreciations have partially reversed
… while sovereign spreads have fallen sharply…
14
0
5
10
15
20
25
30
0
5
10
15
20
25
30
1960 65 70 75 80 85 90 95 2000 05 10 15
Emerging markets
Latin America and the Caribbean
China
GDP per Capita Relative to the United States (%)
Sources: Penn World Tables 9.0; and IMF staff calculations.Note: Emerging markets exclude China and Latin America and the Caribbean countries.
Sources: IMF, World Economic Outlook database; and IMF staff calculations.Note: Corresponds to WEO’s projections for 2022.
The end of the commodity super-cycle has brought a reversal in recent relative income gains…
… and long-term growth prospects remain dim
5.2
2.8
1.7
1.21.1
0
1
2
3
4
5
6
0
1
2
3
4
5
6
EMDE Asia EMDE Europe LAC Sub-SaharanAfrica
United States
Advanced economies = 1.28%
Real GDP Growth per Capita (5-year ahead; %)
15
Presidential approval ratings have fallen to low levels Elections are scheduled to take place in many countries during 2017–18
October 2017 Argentina Mid-term legislative
November 2017 Chile Presidential and parliamentary
April 2018 Paraguay General
May 2018 Colombia Presidential and parliamentary
July 2018 Mexico General
October 2018 Brazil General
2018-H2 Venezuela Presidential (?)
Sources: La Nación-Poliarquia (Argentina), Datafolha (Brazil), Adimark (Chile), Gallup (Colombia), ConsultaMitofsky (Mexico), and El Comercio-Ipsos (Peru).
0
10
20
30
40
50
60
70
80
90
0
10
20
30
40
50
60
70
80
90
Arge
ntin
a
Braz
il
Chile
Colo
mbi
a
Mex
ico
Peru
Post-election peak Latest
I. Global Outlook
II. LAC OutlookIII. Peru
17
-8
-6
-4
-2
0
2
4
6
8
10
12
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
LAC6 GDP Growth
Peru
LAC6 Average
0
1
2
3
4
5
6
7
8
9
10
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
LAC6 CPI Growth
Peru
LAC6 Average
Growth fell somewhat following the end of commodity boom but it has been consistently above peers…
… with inflation consistently being below other LA6 countries
Source: IMF, World Economic Outlook database; and IMF staff calculations. Source: IMF, World Economic Outlook database; and IMF staff calculations.Note: Does not include Argentina.
18
0%
1%
2%
3%
4%
5%
6%
H2 2015 H1 2016 H2 2016 H1 2017
GDP Growth (Y-o-Y)
El Niño-related flooding and landslides and fallout from the Odebrecht corruption investigation impacted growth
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
0.18
0.2
Jan-
16
Feb-
16
Mar
-16
Apr-
16
May
-16
Jun-
16
Jul-1
6
Aug-
16
Sep-
16
Oct
-16
Nov
-16
Dec
-16
Jan-
17
Feb-
17
Mar
-17
Apr-
17
May
-17
Jun-
17
Jul-1
7
Peru: Real GDP Decomposition (3-month rolling growth rate)
PrimaryNon-Primary
Agriculture and mining output was temporarily affected by the extreme weather
Sources: National authorities; and IMF staff calculations.1/ Primary GDP includes Agriculture, fishing, mining and hydrocarbons, and manufacturingprocess for primary resources.
19
Sources: Haver Analytics; and IMF staff calculations.
-30%
-20%
-10%
0%
10%
20%
30%
2016
M1
2016
M2
2016
M3
2016
M4
2016
M5
2016
M6
2016
M7
2016
M8
2016
M9
2016
M10
2016
M11
2016
M12
2017
M1
2017
M2
2017
M3
2017
M4
2017
M5
2017
M6
2017
M7
Leading Indicators (Y-o-Y % change)
Cement consumption (y-o-y % change)Electricity production (y-o-y % change)Capital Goods Imports (y-o-y % change)
Leading indicators pointing to a pick up
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
H1 2017 H2 2017 2018
GDP Growth, Internal Demand and Public Investment
Real GDPInternal DemandPublic Investment
Public investment tied to the el Nino reconstruction efforts will drive rebound
20
Sources: Haver Analytics; and IMF staff calculations.
-2000
-1500
-1000
-500
0
500
1000
1500
2000
2500
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Portfolio Flows(Cumulative through the Year) Million of US$)
2013 2014 2015 2016 2017 38%
40%
42%
44%
46%
48%
50%
52%
2016
M1
2016
M2
2016
M3
2016
M4
2016
M5
2016
M6
2016
M7
2016
M8
2016
M9
2016
M10
2016
M11
2016
M12
2017
M1
2017
M2
2017
M3
2017
M4
2017
M5
2017
M6
2017
M7
2017
M8
Nonresident Holdings(As % of total holdings)
Capital flows have been strong throughout 2017… … leading to an increase in the share of government debt held by nonresidents
21Sources: IMF, World Economic Outlook database; and IMF staff calculations.
-2
0
2
4
6
8
10
-2
0
2
4
6
8
10
12
CHN
VNM
IND
THA
IDN
KAZ
MYS
CHL
BGD
DO
MTU
RN
ICAL
BPA
NH
RV EGY
TUN
NG
AM
AR POL
URY
COL
BGR
ROM
GH
ACR
IPE
RTT
OH
UN
PHL
PRY
MEX SLV
HN
DEC
UBR
ARU
SBO
LKE
NAR
GZA
FG
TM JAM
VEN
SAU
-2
0
2
4
6
8
10
-2
0
2
4
6
8
10
12
CHN
KAZ
IND
VNM
ALB
BGD
ROM
BGR
PAN
RUS
NG
AID
NTU
RD
OM
POL
PER
GH
ATH
APH
LTT
OM
YSM
AR CHL
COL
CRI
URY BO
LN
ICH
UN
HN
DTU
NH
RV EGY
ECU
PRY
KEN
ZAF
SLV
BRA
ARG
SAU
GTM MEX
JAM
VEN
2000-2016 GDP per capita growth (% average)
1980-2016 GDP per capita growth (% average)
0
5000
10000
15000
20000
25000
30000
1 2 3 4 5 6 7 8 9 1011121314151617181920212223242526272829
TaiwanKoreaChileMalaysiaMexico MIC-HIC
Threshold
Nominal GDP per capita since reaching Peru’s 2016 level of income (In US$)
Years since reaching Peru’s 2016 level of income per capita
Reaching high income status is possible, but care will be needed to avoid being stuck in a middle-income trap
Sources: IMF, World Economic Outlook database; and IMF staff calculations.
22
… and high informality are key structural constraints to growth
0
10
20
30
40
50
60
70
80
90
100
6.5
7.2
7.5
7.7
8.0
8.2
8.4
8.6
8.9
9.0
9.1
9.2
9.3
9.4
9.6
9.7
9.8
10.0
10.1
10.4
10.6
10.7
11.0
Log Real GDP Per Capita (PPP)
Informality and PIB per Capita (percentage of employment)
Source: WDI, INEI, and from IMF staff estimations.Note: Data from WDI is for 2012 and reflects the proportion of self employment and total employment. Data from INEI reflects informality as defined by this agency.
Peru 2007-15 (INEI)
Cross-country (WDI)Peru (WDI)
0
1
2
3
4
5
6
7
8
9
10
'07 '15 '07 '15 '07 '15 '07 '15 '07 '15 '07 '15
ARG BRA CHL COL PER MEX
LAC6 and Trade Rivals‘ Infrastructure Comparison(Quality of infrastructure, 2007-15, Index: worst=0, best=7)
Country-specific rivals in exports markets
LAC6Country
Large infrastructure gaps...
Source: April 2016 IMF Regional Economic Outlook, Western Hemisphere.
Order Rank (out of 209) Country Percentile Rank
(0-100)24 Uruguay 88.94
27 Chile 87.50
107 Colombia 49.04
123 Brazil 41.35
124 El Salvador 40.87
141 Argentina 32.69
142 Peru 32.21
148 Ecuador 29.33
151 Bolivia 27.88
154 Guatemala 26.44
157 Mexico 25.00
162 Guyana 22.60
176 Paraguay 15.87
197 Venezuela 5.77
Control of Corruption, 2015
Source: Kaufmann, Kraay, and Mastruzzi (2010), The Worldwide Governance Indicators: Methodology and Analytical Issues.
2015 Worldwide Governance Indicators: Control of Corruption in Latin America
Source: Worldwide Governance Indicators database.
Low tax/GDP
Informality
Infrastructure Gap
Education/Skills and Labor Market Distortions
Governance
Diversification and Potential
Growth
International Monetary FundOctober 2017
Alejandro WernerDirector
Western Hemisphere Department
Global, Regional, and Peru Outlook