The growth of international trade in 2015-2016 was less than that of global GDP, something that has no precedent in the last few decades. At the end of 2016 trade growth began to recover as result of greater investment.
Inflation in the Region has been growing since the middle of 2009 but in 2016 showed a larger increase, due to the increase in food prices and exchange rates, which has influenced exchange policies in several countries.
- The outlook for global economic growth has been slightly adjusted positively, thanks to the recovering of investment, the increase in commodity prices and to the increased activity in the manufacturing sector.
Summary of: Macroeconomic Context
The growth of the world economy appears to be accelerating. Following the weak results of 2016, projections suggest that global economic activity will rebound in 2017 and 2018, bringing widespread improvements to countries. However, growth will continue to present weaknesses and uncertainties, especially in some advanced economies and in countries that export raw materials.
During the first half of 2016, the global economy plummeted: the annual growth rate was one of the lowest in the post-crisis period. However, during the second half of the year, global gross domestic product (GDP) gained some traction, largely due to an upturn in advanced economies. According to the International Monetary Fund (IMF), in 2016 world growth rate was 3.1%, with a declining trend compared to previous years, but a significant and hopeful acceleration during the final months of the year.
The situation in emerging and developing economies, however, is less promising, mainly due to falling prices of raw materials over the past few years as well as the slowdown in the Chinese economy. In addition to low prices for raw materials, Latin America has faced a number of other factors, such as the emergence of internal political crises in various countries of the region, uncertainty over U.S. trade policy and the need for longer fiscal adjustments as a result of the reduction in fiscal revenues from trade in raw materials. In fact, between 2014 and 2016, the performance of Latin America and the Caribbean (LAC) was well below that of the group of emerging economies, China and India. The region’s weak economic performance in 2016 was primarily due to a contraction in investments and consumption in South American countries.
Trade growth in 2015-2016 was less than the growth of global GDP (almost unprecedented in recent decades), although it began to rebound at the end of 2016 due to higher investments. In particular, exporters of raw materials experienced a drastic contraction in investment and imports throughout 2016, a pattern similar to that observed in 2015. The weak growth of global trade in recent years has had a direct impact on trade in LAC, which in 2015-2016 had its worst performance in eight decades (ECLAC 2016b). The deceleration of the decline in commodity prices in 2016, as well as the improvements expected in 2017, should positively impact the terms of trade in the region.
The growth prospects of the global economy have been adjusted slightly upward, thanks to the recovery of investment, prices of raw materials, and activity in the manufacturing sector. World economic growth, which was 3.1% in 2016, is expected to increase to 3.5% in 2017 and to 3.6% in 2018. In LAC, recovery in regional activity is expected to be weaker than at the end of 2016, with expected growth of 1.1% in 2017 and 2.0% in 2018, albeit with marked differences between countries. International trade is expected to grow again, but recent protectionist trends have generated new uncertainties and risks regarding the future of the world economy.