Inflation 2023 in Latin America: will the rise in prices in the region slow down?

2022 will be remembered as a year in which many Latin American countries, whose inhabitants did not remember the word inflation, once again suffered the general rise in prices.

The projections for 2023 mark a path with a bittersweet flavor: everything seems to indicate that the highs reached last year will not be observed again, except in cases such as Venezuela or Argentina, but the problem of rising prices will continue to be a stone in the shoe.

In a recent report, the World Bank notes that in order to control inflation on a lasting basis, countries in the region may require a “substantial further increase in interest rates.”

In another section on Latin America and the Caribbean, the document from the multilateral credit organization states: “General inflation seems to have reached its peak in the middle of the year (2022) in most countries, but it continues to be much higher than the targets of the central banks.

However, governments have shown that they are aware of the need to lower inflation and have tightened their monetary policy, even knowing that this would reduce activity.

“This slowdown reflects both the efforts of the monetary authorities to control inflation and the secondary effects of an inauspicious world outlook,” says the multilateral credit agency.

MARKET INFLATION PROJECTIONS IN DIFFERENT COUNTRIES

In Argentina, the latest Survey of Market Expectations (REM) carried out by the local central bank showed that the median of the country’s consultants forecasts inflation of 98.4% in 2023.

Argentina closed 2022 with inflation of 94.8% and was placed as the fourth country with the highest inflation in the world (taking those for which there is reliable data), behind Zimbabwe, Venezuela and Lebanon.

In Bolivia, the median of economists consulted by the central bank expects inflation in 2023 to reach 3.6% year-on-year in December (the last survey was published last December).

The South American country closed 2022 with one of the lowest inflation rates in the world.

In Brazil, the main economy in Latin America, the latest survey conducted by the central bank shows that market analysts forecast inflation of 5.48% for 2023.

In April 2022, the South American giant had year-on-year inflation of 12.13% and, from there, a sustained decrease was achieved, to close the year with a price rise of 5.79%.

In Chile, the median of consultants responded in January that 2023 will end with inflation of 5% year-on-year.

Chile is also retracing the path of rising prices. It suffered a maximum of 14.1% (yoy) in August, but closed the year at 12.8%.

Along with Haiti, it is the only country in the American continent for which GDP growth projections are negative in 2023, given that its central bank decided to resign activity to lower inflation.

In Colombia, according to the Financial Opinion Survey delivered on Monday, January 23 by the Foundation for Higher Education and Development (Fedesarrollo), inflation expectations for December 2023 stood at 8.89%.

Colombia closed 2023 with an inflation of 13.12%, only surpassed in America by Venezuela, Cuba, Suriname, Haiti and Cuba.

Regarding Costa Rica, the economist of the National Stock Exchange, Juan Pablo Arias, pointed out at the end of December 2022 that by 2023 economic agents have stated that inflation of 6% is expected and that rates will remain high.

This would place it below the 7.88% of 2022.

According to a report from the International Monetary Fund published in November 2022, Ecuador will close 2023 with the lowest inflation in the region (1.4%).

It should be noted that this country was one of the few that did not have major shocks with prices in 2022 and closed the year with 3.74% increases.

The IMF’s November study also foresees a sharp slowdown for El Salvador, which, if the projections come true, would end 2023 with a consumer price index of around 2%.

Inflation in El Salvador in 2022 was 7.34%.

In Guatemala, the local Central Bank has been confident that inflation will return to the target of 4% (+1 or -1%) in 2023.

This forecast is in line with what the IMF projected in November (that is, inflation of 4.8% year-on-year for December 2023).

In 2022 inflation closed at 9.24% in Guatemalan lands.

According to the latest survey of market expectations from the Central Bank of Honduras, the median of those consulted believes that inflation would close 2023 at 8.28% year-on-year.

Honduras ended 2022 with inflation of 9.8% interannual.

In Mexico, the second most important economy in Latin America, inflation for 2023 would close at 5.1%, if the projections of the latest Survey on the expectations of specialists in private sector economics, carried out by Banxico, are met.

Mexico had a maximum of inflation in August and September (8.7% year-on-year in both), but closed 2022 at 7.82% year-on-year.

“We would be projecting for 2023 an inflation that could be between 5 and 6%; the world also expects a moderation of prices”, affirmed the president of the Central Bank of Nicaragua, Ovidio Reyes, in an interview with the newspaper La Prensa, at the beginning of this year.

Nicaragua closed 2022 with 11.38% year-on-year inflation as of December.

Panama ended 2022 with the lowest inflation in Latin America and one of the lowest in the world: 1.4%.

What can happen in 2023? The study published in November by the IMF expects a small rise: it would close at 3% year-on-year to December.

In Paraguay, inflation could close 2023 at 5%, according to the Variable Expectations Survey (EVE) prepared by the Central Bank of Paraguay (BCP) in November.

In 2022, the Paraguayan consumer price index advanced 8.1% year-on-year to December.

The latest survey carried out by the Peruvian central bank shows that economic analysts expect inflation of 4.1% year-on-year for Peru for December 2023, while the financial system and non-financial companies expect 4.5%.

Peru closed 2022 with year-on-year inflation to December of 8.46%.

The latest Survey of Macroeconomic Expectations of the Central Bank of the Dominican Republic (November 2022) showed that the inflation projections for December 2023 stand at 5.8% year-on-year.

This country closed 2022 with an inflation of 7.83%.

In Uruguay inflation inflation would close 2023 at 7.12% year-on-year, if the projections of analysts surveyed by the central bank are met.

Uruguay closed 2022 with 8.29% annual inflation.

Regarding Venezuela, in November 2022 the IMF predicted inflation of 150% at the end of 2023.

Some local analysts expect it to be just below 100%.

It should be noted that the country ended 2022 with inflation of 305.7%, according to figures from the Venezuelan Finance Observatory, which makes an alternative measurement to the official one.

With information from Bloomberg