IMF improves growth forecast for Latin America

The economies of Latin America and the Caribbean registered a solid performance in the first half of 2022 and despite the fact that they face “significant challenges” for the rest of the year, the International Monetary Fund said this Wednesday that it foresees a growth slightly higher than expected.

The forecast is now for 3% growth for all of 2022, up from the 2.5% the IMF had initially projected in April.

However, the agency reduced regional economic growth to 2% for 2023, 0.5% less than it had anticipated in April. Among the reasons he mentioned the tightening of global financial conditions, lower world growth, inflationary pressure, growing social tension and food insecurity.

The IMF’s growth prospects for Latin America in 2022 are more positive than the 2.5% projected by the World Bank and the 1.8% forecast by the Economic Commission for Latin America and the Caribbean (ECLAC).

These are levels similar to those of more than a decade ago and well below the 6.9% of 2021, when the regional economy rebounded after the sharp contraction caused by the coronavirus pandemic.

In each country the situation is different.

The rise in the prices of raw materials after a sharp drop in the pandemic was further strengthened by the war in Ukraine, and has helped in the recovery of the countries that export them, including some in South America, but has had a negative impact on those that depend on imports, such as the nations of Central America and the Caribbean, which are sustained above all by tourism.

The IMF said that among the largest economies, Chile and Colombia have seen a dynamic rebound driven by growth in services by the end of 2021. Mexico, meanwhile, has yet to return to pre-pandemic economic levels.

Central America, Panama and the Dominican Republic, for their part, have already exceeded pre-pandemic levels, encouraged above all by the rapid recovery of the US economy.

The Colombian economy, which grew by 10.7% in 2021, would shrink to 6.3% in 2022 and 3.5 in 2023; and Argentina would go from a growth of 10.4 in 2021 to 4% this year and 3% in 2023, according to IMF estimates.

Peru, which had a rebound of 13.5% in 2021, would fall to 2.8 in 2022, but would rise again to 3% in 2023. Mexico, meanwhile, would go from a growth of 4.8% in 2021, to 2 .4 in 2022 and 1.2% in 2023.

For Chile, the forecast is not encouraging either, since in 2022 its growth would fall from 11.7% in 2021 to 1.8%, and it would be zero in 2023, according to the IMF. Brazil, another of the large regional economies, would have a growth of 1.7% this year, and 1.1% next.

In a blog signed by three of its top economists for the region, the IMF said “prices are likely to remain elevated for some time.” His forecast is for regional inflation of 12.1% in 2022 and 8.7% in 2023.

“We expect inflation to exceed, on average, by at least 400 basis points the upper limit of the ranges that the central banks have set as targets” in Brazil, Chile, Colombia, Mexico, and Peru by the end of this year, and that keep outside that range for part of next year, the IMF said.

These inflationary pressures, the weakening of economic activity and the fall in the prices of raw materials will be important challenges, and the authorities will have to focus on maintaining economic stability and social cohesion, the Washington-based organization recommended.

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