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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 Latin American economies. The balance between current monetary and fiscal policy is assessed, as are panellists' views regarding the likely and recommended direction of policy over the next twelve months.


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Our survey for Economic Policy Evaluation covers each of the countries listed above. For illustrative purposes we have included forecast tables for Argentina and Mexico, along with a small portion of the text commentary taken from our February 2016 survey below. To view a sample issue of Latin American Consensus Forecasts please click the "Download Sample Issues" button below

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In Argentina - Percentage of respondents believing:
Current Too Restrictive About Right Too Stimulative
 Monetary Policy is 0 85 15
 Fiscal Policy is 0 31 69
Future 1 More Restrictive Left Unchanged More Stimulative
 Monetary Policy will be 77 23 0
 Monetary Policy should be 62 31 8
 Fiscal Policy will be 69 31 0
 Fiscal Policy should be 77 15 8

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

After over a decade of the Kirchner-Fernández administration and its heterodox, often arbitrary use of fiscal and monetary policies in Argentina, Mauricio Macri’s government has inherited some significant economic imbalances. The authorities have attempted to unwind some of the more unsustainable policies, including letting the peso float freely and lifting currency and capital controls. Export tariffs on farmers’ agricultural products have also been either cut or eliminated. Both initiatives were well-received by the markets. However, cuts in public spending will drag down activity this year. Moreover, massive government expenditure ahead of last year’s presidential election (see chart, above right) has helped to inflate an already sizeable public deficit which has been badly hit by the retrenchment in commodity prices (both the fiscal coffers and forex reserves were heavily reliant on tax revenue from soybean exports in particular). Our respondents (69%) mostly believe fiscal policy is too stimulative and that it will become more restrictive, although 31% also predict that it will remain largely unchanged, perhaps as a result of the growth slowdown and uncertain global situation. Restrictive monetary policy is also expected, in light of strong inflation pressures, but there again, 31% believe monetary conditions should remain as they are.


In Mexico - Percentage of respondents believing:
Current Too Restrictive About Right Too Stimulative
 Monetary Policy is 0 75 25
 Fiscal Policy is 0 38 62
Future 1 More Restrictive Left Unchanged More Stimulative
 Monetary Policy will be 75 25 0
 Monetary Policy should be 58 42 0
 Fiscal Policy will be 54 46 0
 Fiscal Policy should be 85 8 8

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

In Mexico, the government’s push to implement structural reforms has run into some headwinds, namely the downturn in regional and global activity, and the ongoing retrenchment in oil prices. Indeed, our contributors cited both reasons as unfavourable factors underpinning their forecasts (see box, right page). Spending cutbacks following the precipitous fall in oil prices were implemented last year and these could continue into 2016 as the government is keen to maintain its reputation for prudent economic management. Despite this, however, 62% of our respondents believe that fiscal policy is currently too stimulative while 85% would like to see fiscal conditions tightened. Banxico’s handling of monetary policy has the support of 75% of respondents, but even though most believe the central bank will continue on a tightening bent this year (effectively shadowing US Federal Reserve monetary moves), 42% want monetary policy left unchanged in light of recent low inflation, in order to support growth.

A portion of text from Latin American Consensus Forecasts, February 15, 2016.