MIAMI (AP) — The economies of Latin America and the Caribbean are running out of steam after a strong recovery in 2021 and governments will need to combine structural and inflation-fighting policies to revive growth, the International Monetary Fund said Monday.
After a sharp fall of 6.9% in 2020, regional growth strengthened and reached 6.8% in 2021, encouraged by economic growth in trading partners, higher commodity prices and favorable external financial conditions.
By 2022, the IMF expects the regional Gross Domestic Product to fall to 2.4%, a lower forecast than the 3% it had forecast in October 2021.
“A slowdown is inevitable” as countries return to pre-pandemic GDP levels, the Fund said in a blog post Monday signed by Ilan Goldfajn, the director of the Western Hemisphere department, and two other experts. .
The IMF’s downward forecasts coincide with those of the World Bank, which a few weeks ago anticipated that regional economic activity could decrease to 2.6% this year and 2.7% in 2023.
For the IMF in 2023 the Latin American economy will grow by 2.6%.
The Economic Commission for Latin America and the Caribbean, meanwhile, has stated that most of the countries in the region will not return to growth until 2025. According to ECLAC, it will be the region in the world with the greatest slowdown this year, with a growth of 2.1%, a third of what it grew in 2021.
The IMF said the drop in economic activity also reflected other challenges, including slower growth in China and the United States, continued supply disruptions, tighter monetary and financial conditions, and the emergence of the omicron variant of COVID. -19.
In some of the most important economies in the region —such as Brazil, Chile, Colombia, Mexico and Peru— prices grew by nearly 8.3% in 2021, the steepest rise in the last 15 years and even stronger than in other emerging economies.
Long-term inflation expectations remain relatively reasonable, the IMF said, reflecting confidence in monetary policies to return indicators to target. But in the short term, expectations are high suggesting the need for continued vigilance and further action by central banks in some countries, he said.
“If rising inflation threatens to derail inflation expectations, central banks will have to raise interest rates further” to show continued commitment to targets and avoid further price increases, the IMF said.
On the other hand, the existing uncertainty about the development of the pandemic continues to cloud the global economic recovery and that of Latin America and the Caribbean, and with several elections on the horizon, governments must address the risks of social discontent and inequality, the agency said.
Countries will also have to ensure the sustainability of public finances, the IMF said.