Goldman Revises Down LatAm Growth Forecast

Goldman Sachs is predicting lower growth in Latin America, but it does not see a significant deterioration. “Our backdrop for commodity prices is so positive and the macro fundamentals of the region so strong that the outlook for Latin America would not be significantly dented by a moderate global credit tightening and a moderate slowdown in economic activity in the United States and the world,” says Goldman. It forecasts that LatAm real GDP growth will fall to 4.7% from 4.8%, largely reflecting slight reductions to the growth forecast in Mexico (to 3.0%) and Brazil (to 4.5%). For 2008, Goldman chops the regional projected growth rate to 4.1% from 4.3%. The main revisions are Mexico (to 3.3% from a previous 3.8%) and Brazil (to 4.2% from 4.4%). By contrast, and largely because of the positive effects of commodities, Goldman upgrades the outlook for Argentina (to 5.3% from 5.0%), Chile (to 4.9% from 4.7%), Colombia (to 4.3% from 4.0%), Peru (to 5.8% from 5.5%), and Venezuela (to 4.9% from 4.2%). Goldman also expects the consolidated current account surplus for LatAm in 2008 to hit $12bn, from a previous $10.2bn. However, it predicts lower capital inflows will reduce, but not eliminate, the pace of reserve accumulation.