IMF increases growth forecast for Latin America to 3.5% in 2022

The International Monetary Fund (IMF) on Tuesday (11) slightly improved its growth forecasts for Latin America and the Caribbean for this year to 3.5% but lowered the forecast for 2023, to 1.7%, in the context of high inflation and war in Ukraine.

The World Economic Outlook (WEO) report exudes concern and warns that the risks remain “large.”

The IMF’s antidote is to “stay the course” of monetary policy to restore price stability.

What worries the economic body most is the persistent inflation, both in developed and emerging economies.

The average rate will reach 6.6% globally by the end of the year, not counting food and energy prices, which are more volatile and have soared due to the war in Ukraine.

For 2022, the estimate for Latin America and the Caribbean is for 3.5% GDP growth, an increase of 0.5 percentage points (pp) over projections made in July, while for 2023, it is for 1.7% (-0.3 pp), the IMF announced during its annual meetings in Washington.

The improvement recorded in the region this year is due to stronger-than-expected activity in the first half of 2022.

“Favorable commodity prices, still advantageous external financing conditions, and the normalization of activities in (human) contact sectors” have boosted growth, it highlights.

The industry, which requires high direct person-to-person contact, encompasses, for example, restaurants, retail stores, or public transportation.

The IMF, however, forecasts a slowdown in late 2022 and 2023 as “growth weakens in partner countries, financial conditions tighten, and commodity prices moderate.

Brazil and Mexico, the first and second regional economies, respectively, grow less than average but do well in forecasts relative to other emerging nations.

For Brazil, amid the presidential campaign for the October 30 runoff, the IMF forecasts growth of 2.8% for 2022 (+1.1 pp compared to the July forecast) and 1% in 2023 (-0.1 pp).

The projection for Mexico is 2.1% this year (-0.3 pp) and 1.2% next year (unchanged).

With information from AFP

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