LatAm: Forecasting GDP growth in times of uncertainty

Several simultaneous shocks are impacting the LatAm region. These shocks include: • A terms of trade shock resulting from the collapse of commodity prices. • Lower export growth due to the US and global recession. • A dramatic reduction in domestic consumption from social distancing and lockdown policies containing the spread of Covid-19. • A decrease in remittances due to impact of containment policies in the US and Europe. • A collapse in tourism. • A deterioration in indebtedness ratios for countries and companies due to FX depreciation. In this note, we develop a two-step approach for measuring GDP growth in Argentina, Brazil, Chile, Colombia, Mexico and Peru. First, we measure the impact of the external shock, including the terms of trade shock and the impact from lower growth in the US economy. In the second step, we estimate the economic impact of social distancing via the impact of retail sales on GDP growth. We compare our GDP growth forecasts with those from the OECD, which focuses on the supply-side