“Anemic” scenario: IMF cuts growth forecast for Latin America in 2023 to 1.6%

The International Monetary Fund (IMF) released an update to its economic outlook on Tuesday in which it forecast so the Latin American and Caribbean region will grow by 1.6% this year.0.2% less than anticipated in January, in a context characterized by core and “stubborn” inflation.

As for the global context, the agency forecasts growth of 2.8% in 2023 and 3% over the next five years, “the lowest medium-term forecast in decades”, according to the IMF, which he called the situation “anemic“.

In the region section of its report, the International Monetary Fund also predicts that theBrazil’s economy will grow by 0.9% (-0.3 percentage points compared to the January forecast) and that of Mexico 1.8% (+0.1 pp).

It also predicts Argentina 0.2%, Bolivia 1.8%, Colombia 1%, Ecuador 2.9%, Paraguay 4.5%, Peru 2.4%, Uruguay 2% and Venezuela 5%. Central America will grow by 3.8% and the Caribbean by 9.9%.

The Chilean economy, for its part, it will shrink this year 1%.

By 2024, the Fund expects regional growth of 2.2%.

Inflation

Inflation will remain high in 2023, about 7% worldwidel, but what worries the financial institution the most is core inflation, the one that excludes the more volatile elements such as food and energy.

His forecast, which he will complete on Thursday with details on the region, comes days after the World Bank estimated that regional GDP will grow by 1.4% in 2023 and 2.4% in 2024, too little “to make significant progress in poverty reduction”. .

IMF forecasts for global growth

The body waits a marked slowdown in developed economiesfrom 2.7% in 2022 to 1.3% in 2023.

‘Anemic outlook’ reflects rising interest rates and’Tight policies needed to reduce inflation“, says the agency.

It is also a consequence of the recent deterioration of financial conditions, the ongoing war in Ukraine and “the fragmentation of growth geoeconomic,” the report explains, referring to the growing trend away from the globalization that dominated the economy during the second half of the 20th century and towards protectionist measures.

Despite everything, the IMF has revised its growth forecast upwards this year for the United Statesthe world’s largest economy, growing by 1.6% (+0.2 percentage points compared to those published in January), and by 1.1% (+0.1 pp) in 2024.

The euro area improves to 0.8% (+0.1 pp), as does the United Kingdom, which will end the year in recession but better than expected, with a contraction of 0.3%.

Germany is also exposed to the recession (-0.1% in 2023), while Spain is doing better with expected growth of 1.5% in 2023 and 2% in 2024.

China serves as the world’s economic locomotive and its recovery alleviates the problems of the supply chain. But its prospects are also not optimistic.

After abandoning the zero COVID policy, China’s economy will grow by 5.2% in 2023, but will slow down from 2024 to 4.5%, a very low percentage for the country.

This scenario has led the IMF to change its mind since January: there is no longer talk of a “soft landing”, with falling inflation and constant growth of the economy. He now warns that inflation “is stubborn” and the situation in the financial sector adds to the uncertainty.

Source: AFP