The Ifo/FGV Economic Climate Index for Latin America (ECI) - developed in partnership between ... In Argentina, Brazil,
August 13th 2014
November 2015
Ifo/FGV Economic Climate Index for Latin America APRIL/2015
74
JULY/2015
70
Worsening expectations signal slowing growth in Latin America and the World The Ifo/FGV Economic Climate Index for Latin America (ECI) - developed in partnership between the German Ifo Institute and the FGV taking as a data source the Ifo World Economic Survey (WES) – dropped 5% compared to last July, remaining at a level lower than the historical average for the 10th consecutive quarter. The World ECI also decreased in the quarter (-7%), below the average for the first time since October 2012 (chart 1).
140
Present Situation
Chart 1: Economic Climate Index for world and Latin America (in points)
120
99 100
58
58
80 60
70
40 oct/04
apr/06
oct/07
apr/09
oct/10
apr/12
oct/13
apr/15
Expectations Economic Climate Index - Latin America
90
82
Economic Climate Index - World
In Latin America, the decline in the economic climate was determined by the worsening expectations, since the assessment of the current state of the economy was stable compared to July. Worldwide, there was a decline in both indicators.
The worsening of the ECI was spread among the leading western economies. The indicator remains at favorable level in the United States and the European Union. In both cases, the worsening climate is associated with the Expectations Index (EI), with no change in perception about the current situation in the European Union, and with a reported improvement at the margin for the United States. In the group of BRICS, only India reported a favorable economic climate and improvement compared to the last survey. The assessment of climate in Russia has improved, but not enough for the country to pass to a favorable region of ECI. Among the BRICS, Brazil reported the worst Economic Climate Indicator (chart 2).
Economic Survey for Latin America Ifo/FGV October 2015
Chart 2: Economic Climate Index for Selected Countrie(in points) 160
150
140
126122 118 120118 120 107 109109 100
89
146
133133 111 106 96
133134
128127 120 91 89 74
80
62 64
68
60
75
70 56
49 48 44
40 20 0 European United Union States
Japan
Germany France
United Kingdon
China
apr/15
India
jul/15
Russia
South Africa
Brazil
oct/15
In October, the ECI in Brazil reached the lowest level of the series started in January 1989 (44 points). The Brazilian EI went to 68 points from 76 points (a decrease of 11% between July and October). Expectations, however, have not hit "rock bottom" (an indicator of 20 points) and the lowest figure was recorded in October 2008 (54 points). The Present Situation Index (PSI) in Brazil maintained, in October, the lowest level (20 points), which was reached last July. The October survey showed that the worsening economic climate is common to almost all Latin countries that are marked for analysis. Only Chile and Argentina reported improvement in ECI compared to July, but both remain below the average in the negative phase of the business cycle. Peru and Colombia, which were at more favorable phase, entered the negative (unfavorable) assessment zone. Argentina was the only country which recorded an improvement in EI between July and October, although it remained in negative phase. In all other countries the expectations worsened and only Peru is in a more comfortable situation. The assessment of the current state of the economy improved and the PSI remained in positive zone in four countries: Bolivia, Chile, Colombia and Paraguay. In Argentina, Brazil, Mexico and Venezuela the indicator was stable and in Ecuador, Peru and Uruguay it reported a drop. Finally, the Survey in October consulted some experts about the key factors that have limited economic growth in the country. The table shows, in descending order of importance, the problems cited as relevant: lack of international competitiveness was the most cited problem (10 countries), followed by lack of confidence in government policy (7 countries), lack of skilled labor (6 countries), inflation (5 countries), public deficit (5 countries), lack of capital (3 countries), insufficient demand (2 countries), unemployment (2 countries), export barriers (2 countries) and foreign debt (2 countries). The country with the highest number of limiting factors to growth is Venezuela (8), followed by Argentina and Ecuador (6), Brazil (5), Chile and Uruguay (4), Paraguay and Peru (3), Bolivia and Colombia (2) and Mexico (1). At the global level, the lack of confidence in government policy and insufficient demand are considered the major problems. In Latin America, the lack of confidence in government policy reflects an uncertain scenario. In Brazil, inflation and lack of confidence in government policy are the main problems.
2
Economic Survey for Latin America Ifo/FGV October 2015
Argentina Lack of confidence in government policy
Bolivia
1
Brazil
Chile
1
1
Mexico
1
1
Inflation
1
Lack of international competitiveness
3
Export barriers
2
4
2
Uruguay Venezuela
2
1
1 3
1
2
1
3
2
1
1
3 4
2
Lack of skilled labor
Peru
4
3 1
Paraguay
3
5
Unemployment
4
2
2
1
Foreign debit Lack of capital
Ecuador
2
Insufficient demand
Public deficit
Colombia
4
1
4
5
3
3
3
2
3
3
RANKING OF COUNTRIES Previous Position
Present Position
Country
1 2 3 4 5 7 6 9 8 10 11
1 2 3 4 5 6 7 8 9 10 11
Paraguay Peru Bolivia Colombia Uruguay Chile Mexico Argentina Ecuador Brazil Venezuela
Average ECI of the last 4 quarters Jul/15 120 117 105 100 97 85 86 63 68 53 20
Oct/15 112 112 94 92 90 85 83 69 57 50 20
3
Economic Survey for Latin America Ifo/FGV October 2015
APPENDIX PRESENT SITUATION INDEX (IN POINTS) PSI apr/13 jul/13 Latin America Argentina Bolivia Brazil Chile Colombia Ecuador Mexico Paraguay Peru Uruguay Venezuela
EI Latin America Argentina Bolivia Brazil Chile Colombia Ecuador Mexico Paraguay Peru Uruguay Venezuela
ECI Latin America Argentina Bolivia Brazil Chile Colombia Ecuador Mexico Paraguay Peru Uruguay Venezuela
102 60 114 94 164 112 140 114 158 152 110 20
90 88 114 66 140 106 120 100 154 140 130 20
apr/13
jul/13
104 74 100 128 90 100 100 114 166 114 80 36
86 56 100 84 36 138 80 112 136 82 80 20
apr/13 jul/13 103 67 107 111 127 106 120 114 162 133 95 28
88 72 107 75 88 122 100 106 145 111 105 20
oct/13 jan/14 apr/14 jul/14 80 74 116 84 140 110 126 66 134 128 112 20
88 82 72 64 74 44 34 34 148 180 126 148 84 68 42 30 132 108 86 40 140 146 168 152 140 120 100 116 82 78 78 78 140 130 110 140 138 128 112 82 114 136 126 110 20 20 20 20 EXPECTATIONS INDEX (IN POINTS)
oct/13 jan/14 apr/14 96 80 100 106 68 116 74 112 122 110 78 20
jul/14
95 77 124 89 104 138 107 103 140 132 100 20
90 75 140 71 95 137 100 98 130 134 109 20
84 57 113 55 89 131 73 102 105 112 104 20
58 38 160 30 50 140 140 56 136 100 114 20
60 52 116 22 82 114 46 66 136 74 124 20
oct/14 jan/15 apr/15
102 98 96 96 80 106 80 60 100 100 100 100 94 74 68 84 76 82 92 110 136 128 94 82 74 80 46 52 124 118 126 116 140 130 100 110 126 140 112 150 86 82 82 80 20 20 20 20 ECONOMIC CLIMATE INDEX (IN POIN)
oct/13 jan/14 apr/14 jul/14 88 77 108 95 104 113 100 89 128 119 95 20
oct/14 jan/15 apr/15
92 88 60 84 120 40 20 112 118 162 86 20
82 100 68 76 144 54 46 78 118 126 76 20
oct/14 jan/15 apr/15 80 47 124 57 75 117 84 97 125 116 95 20
75 63 110 57 85 90 80 84 127 131 100 20
71 76 92 49 113 84 46 72 127 100 100 20
jul/15
oct/15
58 50 116 20 36 100 60 74 108 94 108 20
58 50 120 20 52 108 40 74 110 76 90 20
jul/15
oct/15
90 82 68 76 100 114 60 106 90 144 78 20
82 94 40 68 92 64 40 100 80 118 42 20
jul/15
oct/15
74 66 92 48 68 107 60 90 99 119 93 20
70 72 80 44 72 86 40 87 95 97 66 20
Average 10 years 97 94 105 107 124 124 94 85 107 140 142 58 Average 10 years 99 83 88 107 105 101 76 102 112 121 111 62 Average 10 years 98 89 96 107 115 113 85 93 110 130 127 60
4
Economic Survey for Latin America Ifo/FGV October 2015
Methodological Note The Latin America Economic Survey aims for monitoring and forecasting of economic trends, based on quarterly information supplied by economy experts in their respective countries. The survey is - simultaneously - applied with the same methodology in all countries of the region, a method that allows the construction of an agile and comprehensive picture of the economic situation in countries and
economic blocks. In October 2015, were consulted 1040 economic experts in 113 countries, being 129 in Latin America. The survey generates information of both qualitative and quantitative nature. The Economic Climate Index (ECI), is the synthesis indicator, comprised of two items of qualitative nature, the Present Situation Index (PSI) and the Expectations Index (EI), which deal, respectively, with the general economic situation in the country at the moment and for the upcoming six months. The individual responses are combined for each country without any weighting. For the average value of each index to be reached, 9 points are assigned to positive responses (+), 5 to indifferent responses (=) and 1 to negative responses (-). The ECI represents an arithmetic mean of the two indices that comprise it. The process of aggregating data for a particular group of countries or continent is made according to the relative share of foreign trade (exports + imports) in each country regarding the total in the region. According to specific criteria of the survey, the phase of the business cycle the country is at the moment is determined by a combination of PSI and EI. When the two indices exceed the average limit of 5 points, the economy is in the "boom" phase. When both are below 5 points, there is recession. The phase of decrease occurs when the PSI is higher and EI is lower than 5 points. And the recovery phase with a higher EI and the PSI lower than 5 points.
Indicators on this report are presented considering the value 5 as 100. Thus indicators above 100 are in the favorable zone and below 100 in the negative zone.
5
