IMF: Growth Forecast to Weaken in Latin America and the Caribbean

October 12th, 2012
in econ_news, syndication

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Excerpt from IMF report (to read entire report)

Growth in Latin America and the Caribbean slowed to just under 3 percent in the first half of 2012, amid ebbing global demand and the impact of earlier policy tightening. The deceleration was more pronounced in Brazil, the region’s largest economy. Under our baseline, the LAC region is now projected to grow by 3.2 percent in 2012 (down 0.6 percent relative to April projections) and by 4 percent in 2013, as the global recovery strengthens and the impact of policy easing in some countries takes hold.

Output growth in many of the larger and financially integrated economies of the region (Brazil, Chile, Colombia, Mexico, Peru, and Uruguay) has been broadly easing amid ebbing net exports and domestic demand. The deceleration was particularly sharp in Brazil, where global uncertainties and earlier policy tightening had a larger-than-anticipated impact, especially on private investment.

In other countries, the slowdown in growth has been smaller and more recent, including in Mexico, which has benefitted from the fairly strong recovery in U.S. manufacturing in 2011–12. Looking forward, growth in Brazil is projected to pick up in 2013 on the back of the significant policy stimulus in place; in other countries growth will continue to moderate and converge to potential.

Inflation is generally within official target ranges, yet remains above the midpoint in most cases. The recent supply-driven increase in food prices has had a minor impact on headline inflation thus far, with core prices stable (see Box). Inflation in these countries is projected to average around 4 percent during 2012–13, but as the recovery strengthens, timely unwinding of policy stimulus may be required to anchor inflation expectations more firmly in some countries (e.g., Brazil and Uruguay).



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