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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 2017 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 20 70 10
 Fiscal Policy is 0 11 89
Future 1 More Restrictive Left Unchanged More Stimulative
 Monetary Policy will be 0 50 50
 Monetary Policy should be 20 50 30
 Fiscal Policy will be 30 60 10
 Fiscal Policy should be 70 20 10

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

The Macri administration has spent the past year attempting to unwind significant imbalances afflicting the Argentine economy, in the face of numerous headwinds including: recession in Brazil, higher interest rates in the US drawing capital flows away from the emerging markets, and the government’s own austerity measures. Cuts in public spending and energy subsidies were not so well received by the public, but the markets welcomed the free-floating of the peso, and the removal of currency and capital controls. Farmers of Argentina’s lucrative grain and soybean exports also welcomed the lifting of export tariffs. Fiscal policy is still seen as too stimulative by 89% of our respondents, but 60% believe it will remain unchanged in the face of weak growth and public backlash over deeper austerity. As the chart (above right) shows, the fiscal deficit is forecast to widen noticeably both this year and next. The consensus around an independent, inflation-targeting central bank is evenly divided. 70% support the current stance on monetary policy and 50% feel this will and should be left unchanged. However, 50% believe that monetary conditions will become stimulative, perhaps as inflation pressures start to moderate.


In Mexico - Percentage of respondents believing:
Current Too Restrictive About Right Too Stimulative
 Monetary Policy is 29 59 12
 Fiscal Policy is 25 31 44
Future 1 More Restrictive Left Unchanged More Stimulative
 Monetary Policy will be 88 6 6
 Monetary Policy should be 59 24 18
 Fiscal Policy will be 31 63 6
 Fiscal Policy should be 63 19 19

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

In Mexico, the domestic policy outlook has been overshadowed by the election of Donald Trump in the neighbouring US. Trumpís protectionist rhetoric against Mexico and his intention to renegotiate the NAFTA free-trade agreement has put the spotlight on how the Mexican government can and will react. Up until now, government policy has been market-friendly and open to free trade for three decades. Our panel is fairly divided on the current state of fiscal policy, but 63% believe that while fiscal policy is likely to be left unchanged, it should instead become more restrictive. Slower growth this year will put further pressure on the fiscal accounts. Monetary policy is largely expected to tighten as a weak peso drives up inflation. However, 24% of respondents would rather that Banxico left monetary conditions unchanged.

A portion of text from Latin American Consensus Forecasts, February 20, 2017.