LAC economies projected to expand 2%

The International Monetary Fund says Latin America and the Caribbean, LAC, has showed “quite a bit of resilience” and that the rebound from the COVID-19 pandemic has been stronger than previously expected.

“We see resilience partly as a result of countries progress in strengthening their macroeconomic frameworks. With most economies now operating near potential, however, activity in the region has been generally moderating in recent quarters,” Rodrigo Valdes, the director of the IMF’s Western Hemisphere Department, told reporters at the bank’s annual Regional Economic Outlook Press Briefing for the Western Hemisphere.

Still, labour markets have remained pretty resilient, with unemployment still at historical low levels almost everywhere, he added.

“With an external environment that, at least in the trade side, is weakening and the effect of monetary policy tightening to bring down inflation in the region and those effects still materialising,” said Valdes.

Growth is projected to moderate from 2.3 per cent in 2023 to two per cent in 2024. Similarly, medium-term growth is also forecast at about two per cent in the next few years.

In relation to Haiti, a country that remains in turmoil and is currently overrun by criminals, the IMF said it has been keeping watch on that country.

“We have a staff monitoring programme there. But at this point the priority really is to restore security. This is a precondition for macroeconomic stability and for growth to materialise,” said Valdes.

“We are projecting three per cent negative growth this year, given latest developments. And we’re closely monitoring the economic situation, including through big data,” he said of Haiti. “We have a lab in the Fund with that, and we’re also monitoring political developments, including the next steps of the newly foreign presidential council. But we will continue engage during this difficult time within the mandate that the fundamental has,” Valdes told reporters.

In relation to the Caribbean, the IMF official said the region has done “pretty well in the last few years”, adding that the group of countries that were more tourism-dependent had rebounded very quickly and are normalising.

“The following message is valid for all countries in the region: We’re going back to normal growth,” said Valdes. “If we want more growth, what is needed is to work through the underpinnings of long-term growth with reforms of different types. And that’s critical a message for the Caribbean, too,” he said.

On the issue of inflation, Valdes said it is receding throughout the region and is expected to continue falling during this year, “thanks to swift actions of the region’s central banks and also, of course, the global disinflation trend that reflects monetary policy elsewhere, and also that the supply side shocks are normalising.”

The risks to inflation have also become more balanced, he added.

“Our view is that more policy easing should continue, although it will be very important to carefully calibrate the pace of easing to strike a balance between durably bringing inflation back to target in the final stretch and also avoiding an undue economic contraction.”

CMC