Lower growth expected for Latin American Caribbean region — IMF

Lower growth expected for Latin American Caribbean region — IMF

Wednesday, January 22, 2020

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The latest World Economic Outlook (WEO) report from the International Monetary Fund (IMF) still projects a recovery of economic growth for Latin America and the Caribbean, but at a somewhat lower rate than indicated in its previous estimate.

“In Latin America, growth is projected to recover from an estimated 0.1 per cent in 2019 to 1.6 per cent in 2020 and 2.3 per cent in 2021 (0.2 and 0.1 percentage point weaker, respectively, than in the October WEO),” the report outlined.

In January of 2019 the WEO had predicted growth of 1.7 per cent for Jamaica in 2020. While the latest update gives projections for the region it does not give specifics on Jamaica.

The current projections for Latin America and the Caribbean are part of a larger global trend of less than expected economic growth.

According to Gita Gopinath, the economic counsellor and director of the research department at the IMF, global growth is expected to increase “from 2.9 per cent in 2019 to 3.3 per cent in 2020 and 3.4 per cent in 2021. The slight downward revision of 0.1 per cent for 2019 and 2020, and 0.2 per cent for 2021, is owed largely to downward revisions for India.”

The announcement of the US-China Phase I trade deal and the decreased risk of a no-deal Brexit have helped to reduce the threats to growth that were factored into projections made last year. While there is improved stability a significant level of unpredictability remains.

“We are all adjusting to live with the new normal of higher uncertainty,” IMF Managing Director Kristalina Georgieva indicated in her recent presentation of the revised numbers at the annual World Economic Forum in Davos, Switzerland. “We are already seeing some tentative signs of stabilisation but we have not reached a turning point yet.”

This point was stressed by Gopinath in her analysis published in the IMF blog.

“The projected recovery for global growth remains uncertain,” she stated. “It continues to rely on recoveries in stressed and underperforming emerging market economies, as growth in advanced economies stabilises at close to current levels.”

The revisions of the Latin American and Caribbean predictions come as a result of the downgrading of Mexico's growth forecasts for the 2021 period. Another factor is “continued weak investment, as well as a sizable markdown in the growth forecast for Chile, affected by social unrest”.

In contrast, pension reform in Brazil and the resolution of supply issues in that country's mining sector resulted in a more positive economic forecast for the South American nation and this helped to partially offset the wider region's negative revisions.

Regarding the current international situation Gopinath warned that “while there are signs of stabilisation, the global outlook remains sluggish and there are no clear signs of a turning point. There is simply no room for complacency, and the world needs stronger multilateral cooperation and national-level policies to support a sustained recovery that benefits all.”

The reversal of protective trade barriers, accomodative monetary policy “where inflation is still muted”, addressing climate change, an “international tax regime” to “curtail tax avoidance and evasion”, structural reforms, greater inclusiveness in economies as well as safety nets for the vulnerable were some of the policies Gopinath emphasised as necessary for sustained recovery.

“Countries need to cooperate on multiple fronts to lift growth and spread prosperity,” the IMF official stated.

— Alexis Monteith

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