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OECD expects growth in LatAm's 5 biggest economies to recover in 2020

The Organisation for Economic Co-operation and Development expects economic growth in five major Latin American countries to recover in 2020, although at a much slower pace for Argentina, Brazil and Mexico, the region's three biggest economies.

The Paris-based organization forecasts Argentina's GDP to contract 1.8% in 2019 before rebounding to a 2.1% growth rate the following year. Exports, along with a weaker real exchange rate and strong harvest, will continue to support the economic recovery, although they will be constrained by sluggish global trade activity, the OECD said.

Moreover, contractive monetary policies and uncertainty over elections in October will continue to post risks on domestic demand in Argentina, the OECD said.

In Brazil, economic growth will reach 1.4% in 2019 and accelerate to 2.3% in 2020, the OECD said. The passing of the pension reform proposal in Congress will be essential in anchoring long-term fiscal sustainability, with domestic demand and employment expected to bounce back if uncertainty over the reform dissipates.

Meanwhile, the OECD expects GDP growth in Chile to remain robust at 3.4% in 2019 and 3.3% in 2020. Accommodative financing conditions, high copper prices, planned tax and labor reforms and high business confidence will drive investment, while private consumption will grow on the back of low interest rates and strong wage growth, the OECD noted.

Growth in Colombia will also continue to be strong at 3.4% in 2019 and 3.6% next year, the OECD said. A reduction in corporate taxes as well as lower inflation and interest rates will buoy Chile's economy, although demand-driven growth and weak exports will contribute to a widening current account deficit.

The OECD forecasts Mexico's economy to modestly expand by 1.6% and 2.0% in 2019 and 2020, respectively, on the back of domestic demand. Consumption and planned infrastructure projects will support growth, but these will be partly offset partly offset by subdued spending. Policy uncertainty and a decline in oil activity will also weigh on the economy.

The organization lowered its 2019 estimate for global growth to 3.2% from 3.3%, citing vulnerabilities from global trade tensions, increased policy uncertainty and a slowdown in China.