Last week, the Bank of South Korea announced a cut in the country’s growth forecasts, as well as a reduction in interest rates to 2.7 % with the intention of boosting the economy in the face of US taxes and dealing with political instability following the arrest of President Yoon Suk Yeol.

South Korea is going through a moment of tension that it intends to alleviate with this measure announced by the central bank on February 25.

According to the regulatory body, “the new growth forecast is 1.5 % of GDP for 2025, four-tenths below the 1.9 % initially forecast. In addition, the reference interest rate will also be reduced from the current 3 % to 2.75 %.”

The announcement quickly generated concern about its possible impact on key aspects, such as the indebtedness of families, incentive for internal spending, which would increase debts.

However, analysts believe that the reduction in interest rates could boost internal demand, which would translate into “a recovery in consumption and investments in key sectors such as construction, which have shown weakness in recent quarters.”

M.Pino

Source: barrons

(Reference image source: Towfiqu barbhuiya on Unsplash)

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The International Monetary Fund (IMF) expects the Latin American economy to grow by 1.9% in 2023, which represents an improvement of three tenths compared to the latest projections of the organization published last April.

This upward revision of growth prospects for the region is due to stronger than expected growth in some large countries such as Brazil or Mexico, whose economies have been driven by the agricultural sector or the service sector.

However, this increase in the Gross Domestic Product (GDP) of Latin America is much lower than that registered by the region in 2022, when it was 3.9 %. The year-on-year decline is due to the recent moderation of rapid growth in 2022 due to the reopening after the pandemic, as well as declining commodity prices.

Meanwhile, looking to 2024, the IMF estimates that the Latin American economy will grow by 2.2 %, the same figure that it calculated last April. It was on that occasion that the forecast for 2024 improved by two tenths.

Latin America will thus be one of the regions that grows the least in both 2023 and 2024 within the group of emerging market and developing economies. However, globally, it will have a better economic performance than the Eurozone, whose GDP will increase by 0.9 % in 2023, or higher than that of the United States, which will grow by 1.8 %.

By country, it is worth noting the improvement in the forecasts for Brazil, whose estimated growth in 2023 is 2.1 %, well above the 0.9 % estimated last April. Among others, this increase in the figure is due to the good performance of its GDP in the first quarter of the year.

Meanwhile, Mexico will also exceed the 2 % figure and reach up to 2.6 % expansion at the end of this year, although it will grow less than expected in 2024, staying at 1.5 % (one tenth less than in April). The resilient demand from the United States and the ‘nearshoring’ effect are boosting the Mexican economy.

Source: dpa

(Reference image source: BID, Europa Press / dpa)

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