Latin America market report 2024: growth to decelerate as global risks rise

We forecast Latin America's real gross domestic product (GDP) to grow 2.2% in real terms in 2025 (excluding Argentina and Venezuela). That is a deceleration from the estimated 2.5% in 2024. Growth trajectories should remain mixed across the region, with Brazil and Chile slowing down to 2% real GDP growth next year, after better-than-anticipated performance this year, while Mexico will stay relatively stable at 1.5%. In Colombia, real economic growth should improve to 2.4% as inflation falls and monetary policy eases.

We expect the region to fare better than advanced economies, but less so than other emerging markets peers. In the coming years, regional growth will trend close to its long-run potential, which is now more modest than a decade ago since core structural deficiencies (e.g., low productivity, outdated infrastructure and fiscal unsustainability) remain unaddressed. We see risks to the outlook tilted to the downside. Headline and core inflation readings are not firmly on target and external demand is becoming increasingly unreliable along with the risk of escalation in geopolitical tension.

Table 1: Economic indicators and forecasts

Inflation is stalling close to targets' upper limits. Consumer price indices across the region have halved from 2022 highs but we expect them to average at or above the upper limit of target ranges in 2025 (Brazil: 4% and Mexico 3.8%). Interest rate cuts in the US give the region's central banks some room to further lower rates.

Yet sticky core inflation coupled with recent currency depreciation suggest the need for a gradual monetary policy easing. Brazil's approach to fighting higher inflation expectations through tighter monetary policy contrasts with the rest of the region's anticipated interest rates cuts.

Figure 1: Real GDP growth by region, 2022-2025F

External economic conditions are becoming increasingly adverse. We expect Latin America's main trading partner economies, the US and China, to decelerate in the next years. Heightened geopolitical tensions suggest that global trade may face headwinds including supply-side shocks and trade policy hostility. Chile and Mexico are the most exposed, as they are the least diversified of the major regional markets, with strong dependence on manufacturing exports to the US and copper exports to China, respectively. Still, the region is likely to benefit from nearshoring of supply chains amid a longer-term trend of deglobalisation.

We expect total insurance premiums in Latin America to grow 3.8% in real terms in 2025, after strong performance this year (estimated at 7.6%). Premiums rose robustly in 2024, benefiting from hard market conditions (for non-life lines) and from higher interest rates (for life products with saving components). Those tailwinds should continue to support growth, although more modest in some markets.

Figure 2: Direct premiums written (USD bn) by country, 2016-2025F

We forecast 4.0% growth in the region's Life and Health (L&H) premiums in real terms for the region next year, down from an estimated 8.0% in 2024. We expect P&C (Property & Casualty, excludes health) premium growth to slow to 3.3% in 2025, from a projected 6.3% this year. In the coming years, insurance premium gains will continue to outpace economic growth in Latin America, as seen over the past two decades.

Nevertheless, our latest estimates show protection gaps remain large in the region, totalling USD 151 billion in premium equivalent terms in 2023.  A regulatory push in the region is encouraging the adoption of open insurance, which is intended to improve affordability of insurance by increasing competition, and potentially lifting the insured base.

We expect rates in commercial insurance to moderate, but risks are tilted to the upside. In the third quarter of 2024, the composite commercial insurance prices index rose 3% in the region, above global average (-1%). Pricing increases have been driven by casualty lines, particularly motor, due to higher values of vehicles and repair costs.

Property rates remain on the rise on the back of elevated natural catastrophe events. Despite recent moderation, pricing risks such as FX volatility, growing anecdotal evidence of social inflation in Mexico and rising medical costs, are skewed to the upside, and could extend the hard market conditions.