WASHINGTON: The IMF on Tuesday trimmed its economic growth forecasts for Latin America and the Caribbean this year but said the outlook for the region was positive.
Though output growth "moderated somewhat" during 2012, "domestic demand remains strong and external current account deficits have widened further, even with high commodity prices," the International Monetary Fund said in its World Economic Outlook report.
The IMF projected regional gross domestic product growth of 3.6 per cent for 2012, down 0.2 point from its January WEO update.
In 2014, GDP growth in Latin America and the Caribbean was expected to pick up to 3.9 per cent, the IMF said.
The negative risks to the near-term outlook for the region have diminished as the United States and the eurozone have taken policy steps to contain the immediate threats to global growth, it said.
Meanwhile, an acceleration in China's growth "should help support commodity prices and the region's exports."
Inflation remained largely subdued except in some countries, such as Brazil and Uruguay, where inflation remained at the high end of the target.
Capital inflows have been strong, bank credit grew and household and corporate debt increased, the report said. One of the IMF's biggest forecast adjustments was for Brazil.
Growth in Latin America's powerhouse was estimated at 3.0 per cent this year, down from the January forecast of 3.5 per cent, "reflecting the lagged impact of domestic policy easing and measures targeted at boosting private investment."
Brazil's slowdown was impacting its main regional trade partners Argentina, Paraguay and Uruguay, which the IMF projected would grow this year by 2.8 per cent, 11.0 per cent and 3.8 per cent, respectively.
In Argentina, which in February the IMF censured for the poor quality of its economic data, "widespread import and exchange controls also affected business confidence and investment."
The IMF trimmed Mexico's growth prospects one-tenth point to 3.4 per cent, saying the economy was expected to expand near its potential "with domestic demand underpinned by sustained business and consumer confidence and resilient exports."
Growth also remained strong in Peru and Chile, at a pace of 6.3 per cent and 4.9 per cent, respectively.
Countries that export commodities should benefit from global growth, with the "notable exception" of Venezuela, where expansion would stutter to 0.1 per cent as the pace of fiscal spending declines.
In addition, private consumption growth in Venezuela was expected to fall following the recent currency devaluation and tightening of foreign-exchange controls, the IMF said.
Central American economies continued to be robust, with growth penciled in at about 4.4 per cent, unlike the heavily indebted Caribbean, where growth would be only 2.2 per cent amid a decline in tourism.
The main risks for the region remain the potential reversal of easy external financing conditions and favorable commodity prices, the IMF warned.
For example, it said, if there were a 10 per cent decline in private investment in the BRICS (Brazil, Russia, India, China, South Africa), that could reduce output in Latin America by more than 1 per centage point during 2013-2014 through its effect on demand for commodities and other exports.
"The key challenge for the medium term remains boosting productivity and competitiveness," it said.
"To maintain high rates of potential output growth, the region needs to invest more in infrastructure and human capital, improve the business and regulatory environment, and diversify exports."
indiatimes.com
Though output growth "moderated somewhat" during 2012, "domestic demand remains strong and external current account deficits have widened further, even with high commodity prices," the International Monetary Fund said in its World Economic Outlook report.
The IMF projected regional gross domestic product growth of 3.6 per cent for 2012, down 0.2 point from its January WEO update.
In 2014, GDP growth in Latin America and the Caribbean was expected to pick up to 3.9 per cent, the IMF said.
The negative risks to the near-term outlook for the region have diminished as the United States and the eurozone have taken policy steps to contain the immediate threats to global growth, it said.
Meanwhile, an acceleration in China's growth "should help support commodity prices and the region's exports."
Inflation remained largely subdued except in some countries, such as Brazil and Uruguay, where inflation remained at the high end of the target.
Capital inflows have been strong, bank credit grew and household and corporate debt increased, the report said. One of the IMF's biggest forecast adjustments was for Brazil.
Growth in Latin America's powerhouse was estimated at 3.0 per cent this year, down from the January forecast of 3.5 per cent, "reflecting the lagged impact of domestic policy easing and measures targeted at boosting private investment."
Brazil's slowdown was impacting its main regional trade partners Argentina, Paraguay and Uruguay, which the IMF projected would grow this year by 2.8 per cent, 11.0 per cent and 3.8 per cent, respectively.
In Argentina, which in February the IMF censured for the poor quality of its economic data, "widespread import and exchange controls also affected business confidence and investment."
The IMF trimmed Mexico's growth prospects one-tenth point to 3.4 per cent, saying the economy was expected to expand near its potential "with domestic demand underpinned by sustained business and consumer confidence and resilient exports."
Growth also remained strong in Peru and Chile, at a pace of 6.3 per cent and 4.9 per cent, respectively.
Countries that export commodities should benefit from global growth, with the "notable exception" of Venezuela, where expansion would stutter to 0.1 per cent as the pace of fiscal spending declines.
In addition, private consumption growth in Venezuela was expected to fall following the recent currency devaluation and tightening of foreign-exchange controls, the IMF said.
Central American economies continued to be robust, with growth penciled in at about 4.4 per cent, unlike the heavily indebted Caribbean, where growth would be only 2.2 per cent amid a decline in tourism.
The main risks for the region remain the potential reversal of easy external financing conditions and favorable commodity prices, the IMF warned.
For example, it said, if there were a 10 per cent decline in private investment in the BRICS (Brazil, Russia, India, China, South Africa), that could reduce output in Latin America by more than 1 per centage point during 2013-2014 through its effect on demand for commodities and other exports.
"The key challenge for the medium term remains boosting productivity and competitiveness," it said.
"To maintain high rates of potential output growth, the region needs to invest more in infrastructure and human capital, improve the business and regulatory environment, and diversify exports."
indiatimes.com
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