Economic Policy Evaluation

ECONOMIC POLICY EVALUATION

In addition to their regular forecasts for the major economic indicators, (in February for Latin American Consensus Forecasts and in July for the Consensus Forecasts and Asia Pacific Consensus Forecasts countries) we survey our panelists for their qualitative evaluations of economic policy. The data below sets out the consensus responses for two of the larger Latin American economies. The balance between current monetary and fiscal policy is assessed, as are panelists' views regarding the likely and recommended direction of policy over the next twelve months.

Our survey for Economic Policy Evaluation covers each of the countries listed above. For illustrative purposes we have included forecast tables for Brazil and Mexico, along with a small portion of the text commentary taken from our February 2011 survey below. To view a sample issue of Latin American Consensus Forecasts please click the "Download Sample Issues" button below

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¹ Relates to monetary and fiscal policy over the next twelve months.

In Brazil, GDP growth is estimated to have exceeded 7.0% last year after the economy recovered from a brief recession in 2009. However, the rapid expansion has led to worries about the risk of overheating, especially as inflation continued to breach the official end-year target of 4.5% for much of the latter part of 2010. In a bid to tame inflation, Banco Central do Brazil hiked rates to 11.25% last month, and all respondents believe that monetary policy will become more restrictive over the next twelve months. As for fiscal policy, even though the new administration announced spending cuts earlier this month, 75% of our panel hold the view that it is currently still too loose. And an overwhelming 88% of respondents believe fiscal policy should become more restrictive.

¹ Relates to monetary and fiscal policy over the next twelve months.

The Mexican outlook has turned increasingly positive in light of a steady domestic recovery and the recent acceleration in US activity. Given Mexico’s close NAFTA links, manufacturing is benefiting from this uptick in fortunes north of the border, and this has been cited as the single most important factor affecting forecasts for 2011 and 2012 (see box, right). On the policy front, sentiment appears to be relatively supportive of the authorities’ current policy mix. Indeed, 63% of respondents view current monetary conditions as about right while an even larger 75% are content with current fiscal policy. Looking ahead, an uncertain inflation outlook (in light of soaring commodity prices) is provoking some divergence over the direction of central bank policy, with half of respondents believing it should be left unchanged and the other half looking for interest rate hikes. Meanwhile, despite the fiscal accounts in the red, 56% think policy should be left unchanged.

A portion of text from Latin American Consensus Forecasts, February 21, 2011

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