The International Monetary Fund is predicting that Latin
America (Latam) will keep growing this year, reaching a growth rate of
3% even with all of the difficulties that the region is facing. The
institution believes that the economic recovery that Latam is enjoying
after the Covid-19 pandemic will be decelerated by several factors,
including the macroeconomic conditions, rising inflation, and increasing
social tensions amidst energy and food insecurity.
IMF Predicts Latam Will Keep Growing
The International Monetary Fund has issued
a series of predictions on the growth and the possible difficulties
that Latam will be facing in the second half of 2022. After examining
all of the variables, the institution predicts that the region will grow
by 3% in 2022, fueled by the economic recovery and the reopening of
many industries that were hit by the Covid-19 pandemic.
This upgraded forecast is higher that the earlier prediction the
International Monetary Fund had made, expecting the region to grow by
just 2.5%. However, even with this positive prediction, the fund states
that there are many factors that will test the economic performance of
Latam later this year.
These factors, which include the macroeconomic conditions the world
economy is facing, an increasingly inflationary panorama, and the social
tensions in the region, have taken the International Monetary Fund to
downgrade its growth forecast to 2.5% in 2023.
Shifting Global Winds
The organization explains how these factors are worsening, with the
inflationary pressures and global deceleration being the most important.
In regards to the inflation problem, the institution expects it to keep
growing and exceed earlier records. It states:
Inflation… has accelerated throughout the region, amid rebounding
domestic demand, lingering supply chain disruptions, and rising
commodity prices.
The fund expects inflation rates to outgrow the central banks’ target ranges in Brazil, Chile, Colombia, Mexico, and Peru.
All of this panorama will make regulating and policymaking a
difficult task in the coming months. Lawmakers will have to balance
economic stability and social policies to aid the troubled ones,
avoiding social crises and institutional stability problems in the
process.
The International Monetary Fund is not the only institution worried
about the difficulties Latam is facing. The Bank of Spain has expressed
these same worries in a report
issued recently, where it warns that institutional instability might
appear as a consequence of the “loss of purchasing power that the most
vulnerable households have been suffering in recent quarters due to the
rise in inflation.”
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