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IMF predicts improvements in economic prospects for Caribbean/Latin America in 2018

Saturday, January 27, 2018

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WASHINGTON, DC, USA (CMC) — The International Monetary Fund (IMF) says economic prospects for the region are generally improving and modest growth is expected in 2018 and 2019.

The IMF, in its Regional Economic Outlook Update for Latin America and the Caribbean, released on Thursday, said the positive outlook is supported by growth in the United States following the recent US tax reform.

However, the international lending agency noted that some of the islands which were hit hard during the 2017 hurricane season face a protracted recovery.

One such country is Dominica.

“In Dominica, gross domestic product (GDP) is projected to decline by 16 per cent in 2018, before rebounding in 2019 as reconstruction gathers pace.”

The IMF also noted that overall, recent trends in the world economy and financial markets means good news for the Caribbean and Latin America.

“Global growth and trade are on an upswing, and we expect the momentum to continue in 2018. Stronger commodity prices have also helped the region rebound.”

The report said consumption and exports were the main growth drivers last year and the recovery is broad-based across the region.

“Encouragingly, investment is no longer a drag, and is expected to be an important factor behind the acceleration in output this year and next. Inflation came down significantly in 2017 in many countries, providing some scope for easing monetary policy.”

The Washington-based lending agency said that while Mexico, Central America, and parts of the Caribbean are benefiting from stronger growth in the United States, growth in South America is mainly driven by the end of recessions in Brazil, Argentina and Ecuador, as well as higher commodity prices.

It said that in the United States, reforms to US corporate and personal income taxes passed in December 2017 will likely raise private investment and private consumption over the short term.

The report also revealed that in Central America and the Dominican Republic output growth remains robust, helped by stronger-than-anticipated remittances flows, improved financial conditions, and good harvests.

However, it was also stated that some risks could hurt the region's recovery — including upcoming elections in some countries — which could create economic and policy uncertainties in the next year.

“Pressures for inward-looking policies in advanced economies, including through a retreat from cross-border integration, and factors such as global geopolitical tensions and extreme weather events could compound these uncertainties.”

The IMF said in looking beyond the near term, the region also faces serious medium-term challenges.

“As we have been emphasising, despite the current economic acceleration, Latin America's output growth is returning to an underwhelming mean. Subdued potential growth and downside medium-term risks call for further efforts to rebuild buffers and implement structural policies to address growth bottlenecks and improve resilience.”

The lending institution said countries that need to lower fiscal deficits should give attention to the fine balance between preserving inclusive growth and stabilising high public debt, which has been rising.

“To better withstand future shocks, maintaining exchange rate flexibility and further improving central bank communication and transparency would increase the resilience and effectiveness of monetary policy,” the IMF stated.

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