The soft underbelly of South America

The International Monetary Fund recently released its October World Economic Outlook update along with its Fiscal Monitor report. We take a look at the numbers for South America and put it into context.

For sure, fiscal actions by government has been unprecedented as it amounted to $11.7 trillion globally. This forceful response by governments resulted in large fiscal deficits while global debt increased substantially. Luckily, the current low interest rates environment remain supportive of such increase in debt.

However, fiscal risks are high given the uncertainty on the shape of the economic recovery, the ongoing pandemic and the extent of the damage already done that could lead to more economic disruption in more vulnerable economies such as the ones in South America.

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