Latin America and Caribbean ( LAC ) region .
THE WINDS OF CHANGE
We highlight trends and economic forecasts for the Latin America and Caribbean ( LAC ) region .
“ Growth momentum continues in Latin America and the Caribbean , and the IMF expects the region to grow by 3.5 per cent in 2022 . Amid tightening global financial conditions , however , growth is projected to decelerate to 1.7 per cent in 2023 .”
The economies of Latin America and the Caribbean have continued their strong post-pandemic rebound , but the winds are shifting as global financial conditions are tightening and commodity prices are reversing their upward trend , while inflationary pressures persist .
“ The reopening of contact-intensive sectors , especially hospitality and travel , the unwinding of pandemic pent-up demand and still-favourable external financial conditions supported a solid expansion in the first half of the year , allowing services to catch up with manufacturing , and employment to reach pre-pandemic levels . Year-onyear growth reached 2.8 per cent in the first quarter of 2022 , compared to an average of 1.7 per cent in the years preceding the pandemic ,” commented the International Monetary Fund ( IMF ).
However , it also pointed out that the region faces significant challenges including tightening global financial conditions ; lower global growth ; persistent inflation and increasing social tensions amid growing food and energy insecurity .
Weathering the shocks
Recent developments in Latin America and the Caribbean have been dominated by the impact of two distinct global shocks : the COVID-19 pandemic and the Russian invasion of Ukraine . A third shock — tightening global financial conditions — is now shaping the outlook for the region , the International Monetary Fund ( IMF ) said in its latest Regional Economic Outlook for the Western Hemisphere .
“ After contracting sharply in 2020 , most of the economies in Latin America and the Caribbean recovered strongly in 2021 and early 2022 helped by the global recovery , the normalisation of service sectors and favourable external conditions , including high commodity prices . Strong momentum early in the year led to an upward revision of growth to 3.5 per cent for 2022 – a half percentage point higher than projected in July ,” explained the IMF .
However , inflation pressures built up and became broad-based throughout the region . In Brazil , Chile , Colombia , Mexico and Peru inflation recently reached a two-decade high of ten per cent . The swift response of the region ’ s monetary authorities — raising interest rates well ahead of other economies — helped to contain price pressures and keep long-term inflation expectations anchored . However , inflation remains high and is expected to recede only gradually .
32 |
ismr . net | ISMR December 2022 / January 2023