In its report “Outlook for the Americas: Navigating Tighter Financial Conditions,” the IMF noted that downside risks to economic activity predominate in the forecasts and are linked to tighter financial conditions, a more pronounced global slowdown, and entrenched inflation.
AP, MIAMI
Latin America's economic activity will decline from the end of 2022 and into 2023, mainly due to international monetary and financial tightening, according to regional forecasts released Wednesday by the International Monetary Fund.
In Latin America and the Caribbean, "a drastic fall in commodity prices and social unrest are significant risks," the Washington-based organization warned.
Downward forecasts resurfaced after the region appeared to be slowly recovering from the impact of the coronavirus pandemic. In 2022, economies were also impacted by the Russian invasion of Ukraine, and now the blow of rising international interest rates has been added to the mix.
After experiencing economic growth of 6.9% in 2021, Latin America is projected to grow by 3.5% in 2022 (3.4% excluding Venezuela), 1% higher than the April forecast. However, activity is expected to slow toward the end of the year, with regional GDP expanding by only 1.7% in 2023, a decrease of 0.8 percentage points compared to the April projections, the IMF.
In its report “Outlook for the Americas: Navigating Tighter Financial Conditions,” the IMF noted that downside risks to economic activity predominate in the forecasts and are linked to tighter financial conditions, a more pronounced global slowdown, and entrenched inflation.
At the regional level, the organization projects that inflation will remain high "for some time" and will be around 14.6% by the end of 2022. In 2023, it would fall to 9.5%.
This is a “higher and more persistent inflation than expected” caused mainly by energy and food shortages in some countries, and by the “unusually rapid” expansion of domestic demand in others, the IMF explained in its 54-page report.
As inflation persists, countries should avoid prematurely easing monetary policy, the IMF recommended, while advising them to move forward with inclusive fiscal consolidation that protects social objectives, promotes productivity, and eliminates barriers to entry and exit for businesses, among other measures.
