The International Monetary Fund cut its 2011 economic growth forecast for Latin America as domestic demand slows on tighter macroeconomic policies and weaker global growth.
Driven by commodity producers, Latin America and Caribbean economies should expand 4.5 percent this year, below the forecast of 4.6 percent made in the IMF’s World Economic Outlook Update in July, the fund said in a report today. Argentina and Chile will lead the region, growing 8 percent and 6.5 percent respectively, while the region’s biggest and second-biggest economies -- Brazil and Mexico -- will both climb 3.8 percent.
“The risks to the near-term regional outlook point down,” according to the report. “A sharper slowdown in advanced economies, notably the United States, would dampen growth, particularly in economies dependent on trade, tourism spending and remittances,” such as the Caribbean, Central America and Mexico.
In 2012, the two largest regional economies will grow 3.6 percent, said the IMF, unchanged for Brazil and below the previous forecast of 4 percent for Mexico, as Latin American economies move toward more sustainable growth.
The region’s annual inflation rate should end 2011 at 6.75 percent, and fall to 6 percent in 2012, the IMF said.
Venezuela will continue to have the region’s highest inflation this year at 26 percent, while prices will rise 11.5 percent in Argentina and 6.6 percent in Brazil, the IMF said.
Though the banking systems in Latin America and the Caribbean are strong, “it is important to continue to monitor potential financial sector vulnerabilities and strengthen financial sector supervision, including for nonbank financial intermediaries, to contain the buildup of excessive leverage and avoid boom-bust credit cycles,” said the IMF.
The report noted that capital controls can provide temporary relief to strong portfolio investment inflows into commodity-exporting countries. Still, governments should avoid pro-cyclical spending and consider adopting structural fiscal targets and binding medium-term plans, it said.
Source: www.bloomberg.com
Driven by commodity producers, Latin America and Caribbean economies should expand 4.5 percent this year, below the forecast of 4.6 percent made in the IMF’s World Economic Outlook Update in July, the fund said in a report today. Argentina and Chile will lead the region, growing 8 percent and 6.5 percent respectively, while the region’s biggest and second-biggest economies -- Brazil and Mexico -- will both climb 3.8 percent.
“The risks to the near-term regional outlook point down,” according to the report. “A sharper slowdown in advanced economies, notably the United States, would dampen growth, particularly in economies dependent on trade, tourism spending and remittances,” such as the Caribbean, Central America and Mexico.
In 2012, the two largest regional economies will grow 3.6 percent, said the IMF, unchanged for Brazil and below the previous forecast of 4 percent for Mexico, as Latin American economies move toward more sustainable growth.
The region’s annual inflation rate should end 2011 at 6.75 percent, and fall to 6 percent in 2012, the IMF said.
Venezuela will continue to have the region’s highest inflation this year at 26 percent, while prices will rise 11.5 percent in Argentina and 6.6 percent in Brazil, the IMF said.
Though the banking systems in Latin America and the Caribbean are strong, “it is important to continue to monitor potential financial sector vulnerabilities and strengthen financial sector supervision, including for nonbank financial intermediaries, to contain the buildup of excessive leverage and avoid boom-bust credit cycles,” said the IMF.
The report noted that capital controls can provide temporary relief to strong portfolio investment inflows into commodity-exporting countries. Still, governments should avoid pro-cyclical spending and consider adopting structural fiscal targets and binding medium-term plans, it said.
Source: www.bloomberg.com
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