The International Monetary Fund (IMF) warned this Wednesday that Latin America will grow an average of 3.5% this year, about four points less than in 2021; but the biggest drop is projected by the multilateral organization for 2023 when some countries will enter a recession.
In 2023, the Latin American economy will grow by 1.7 according to the projections of the Washington-based multilateral, which has warned that the effect of global inflation, Russia’s war against Ukraine and the interest rate control policies of the central banks of developed countries like the United States to reduce inflation will impact the dynamics.
“Growth momentum continues in Latin America and the Caribbean with the region forecast to grow 3.5% in 2022. But given tightening global financial conditions, growth is projected to slow to 1.7% in 2023,” said the agency when presenting its report Economic Perspectives: The Americas.
The multilateral considers that despite the stress on productivity and public finances, nations must be prepared for adjustments to avoid rising inflation.
“Monetary policy must stay its course and premature relaxation must be avoided, while fiscal policy must focus on targeting public finances while protecting the vulnerable population from the impact of inflation,” the IMF said in its report.
The financial institution, part of the World Bank Group, maintains that the surge in growth in 2021 for the region was related to the slowdown in the global economy in the year of closures due to Covid-19, and was well coupled to the global recovery.
But after the rebound effect, the prospects for were adjusted, at the same time that the supply chain crisis and inflation that changed the panorama.
Effects of inflation and war in Ukraine
However, the IMF says that the accumulated inflationary pressures have touched a broad base of the economy in the region in countries such as Brazil, Chile, Colombia, Mexico and Peru, countries where inflation stood at 10%, a maximum not registered in Two decades.
“The rapid response of the region’s monetary authorities —which raised interest rates much sooner than in other economies— helped contain price pressures and keep long-term inflation expectations anchored. However, inflation remains high and is expected to subside only gradually, ”says the IMF in its report.
The multilateral organization also foresees that the drop in the prices of raw materials and social unrest in wide swaths of the continent will contribute to a more pronounced slowdown, which is predicted as a global perspective.
“Given that inflation has yet to subside, and that most economies continue to operate at or near their potential level, a premature easing of monetary policy must be avoided and should remain on course. Having to restore price stability later if inflation takes hold would be very costly,” the IMF said in a statement.
The IMF also believes that the economic matrixes of Latin American countries should stimulate growth in the medium term “for which productivity and good quality public and private investment must be promoted.”
And policies should be geared towards investing in human capital, which will require modernizing and simplifying labor regulations and eliminating company recruitment barriers.
Connect with the Voice of America! Subscribe to our channel Youtube and turn on notifications, or follow us on social media: Facebook, Twitter and Instagram.
