Our below-consensus outlook for the Latin In EM Asia, we are expecting 2023 GDP American region is driven by a few factors. growth of 4.6%, broadly in line with consensus. First is our below-consensus U.S. growth outlook. Our view is driven by two countervailing forces. Seventy percent of Mexican exports go to the Our forecast for a cyclical growth rebound in U.S., and Mexican exports are highly correlated China supports a positive EM Asian growth with the U.S. inventory cycle (excluding autos). outlook. Additionally, as inflation in EM Asia After a strong build over the last year, we expect falls, we expect central banks to end their hiking inventory growth to slow along with the slowing cycle, which will support growth. EM Asian export U.S. economy. This will put downside pressure on growth has been a major growth support during both Mexican growth and the Mexican current the recovery from the pandemic. We believe that account. Second, Latin America is the only EM consensus expectations for a mix of modest rate region with central bank interest rates above hikes and cuts and broadly flat inflation are fair. inflation. However, inflation is falling quickly across many Latin American economies (Figure I-29). This means interest rates will be even more restrictive at current levels, further slowing economic growth. FIGURE I-29 Inflation in emerging Europe is mainly energy-driven at this point, while inflation in both emerging Latin America and emerging Asia looks more persistent ) % the ng oan mh Emerging Eurpe -c  e ee thrag (t n one c tir ae Emerging Latin America p fl nd i e Emerging Asia ez  dlinuali an en Ha – Feb. Dec. Oct. August June April       Sources: Vanguard calculations, based on data from Refinitiv, as of October 31, 2022. 35