Weak Growth Outlook Should Make Latin American Central Banks "Somewhat" Dovish at The Margin, Says SocGen

12:30 PM EDT, 08/19/2025 (MT Newswires) -- Latin American economies entered Q3 with clear signs of weakening momentum, said Societe Generale.

Chile's growth slowed in Q2, with negative monthly activity at quarter end, while Colombia's gross domestic prodcut and activity fell short of expectations, suggesting a negative carryover effect for Q3, wrote the bank in a note to clients.

Brazil's robust first half was undermined by consecutive monthly declines towards the end of Q2, pointing to a further slowdown ahead, and although Mexico posted a positive surprise in Q2, underlying weaknesses suggest contraction is more likely in H2, stated SocGen.

Overall, apart from Mexico's temporary upside, the region's recent data aligns with forecasts for below-potential growth in 2025, added the bank.

Country-specific factors reinforce this weak outlook, pointed out SocGen. Brazil faces policy tightness, fiscal constraints and fading commodity support, making a H2 contraction likely despite a strong labor market.

Mexico's growth outlook is threatened by falling investment, a weakening job market and persistent tariff uncertainty, with trade policy clarity expected only after USMCA review. Chile's recovery relies heavily on domestic demand amid weakening external conditions, while Colombia's mixed demand dynamics and weak exports signal growth below central bank forecasts, noted SocGen.

These trends may prompt regional central banks to consider further, additional or earlier easing, notwithstanding the continuing fiscal and external risks, concluded SocGen.

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.