Governments in Latin America will have less flexibility to improveeconomic growth through fiscal measures in 2016 as growth remains subdued and commodityprices stay low, according to Moody's.
Most governments in the region are expected to have moderate-to-lowfiscal space in 2016, the rating agency said May 5, noting that this will limittheir ability to cope with adverse shocks using fiscal policies.
"Several governments in the region will be forced to implementexpenditure cuts at the expense of economic growth, even in the current low growthenvironment," said Moody's analyst Renzo Merino.
Chile and Paraguay have the most fiscal space among Latin Americansovereigns, while countries with moderate-to-low fiscal space include Argentinaand Venezuela. Brazil, meanwhile, has low fiscal space, Moody's added. Peru is acountry with high-to-moderate fiscal space, which has allowed the government toadopt a counter-cyclical response to slowing growth — the only such case in theregion.