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IMF predicts moderate expansion in economic growth for Latin America, Caribbean

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IMF predicts moderate expansion in economic growth for Latin America, Caribbean

Saturday, January 26, 2019

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WASHINGTON, DC, USA (CMC) — The International Monetary Fund (IMF) yesterday said economic activity in the Caribbean is still projected to pick up in 2019-20, mainly due to robust tourism from the United States and reconstruction from the devastating hurricanes of 2017.

Figures released by the Washington-based financial institution note that real gross domestic growth in Latin America and the Caribbean will increase from 1.1 per cent last year to two per cent in 2019 and 2.5 per cent the following year.

It said in the Caribbean’s tourism-dependent countries, the growth will move from 1.4 per cent last year to 1.8 this year and 2020.

For those Caribbean commodity exports the growth will be much higher, moving from 1.5 per cent last year to 1.6 per cent in 2019 and increasing to as much as 5.5 per cent in 2020.

“Economic activity in the Caribbean is still projected to pick up in 2019-20, thanks to robust tourism from the U S, reconstruction from the devastating hurricanes of 2017 in some tourism-dependent countries, and higher commodity production in some commodity exporters,” the IMF said.

It said, however, that even as growth in Latin America and the Caribbean continues to strengthen, it remains well below other peer countries.

Director of the Western Hemisphere Department at the IMF, Alejandro Werner said several risks could further harm the outlook for Latin America and the Caribbean.

“For instance, escalating trade tensions between China and the United States, or a slowdown in some major economies could result in lower trade growth for the region. The region would also suffer if global financial conditions tighten further, including spikes in global financial volatility, higher US interest rates, and a stronger US dollar.

Additionally, higher volatility in global markets could result in less capital flowing to the region, potentially harming investment potential,” he added.

Werner said that as the global economy slows, the narrow window of opportunity in the region to complete reforms is closing.

“Debt and deficit reduction will need to continue in several countries to ensure debt sustainability. These policies should minimise the adverse effects on economic activity and poverty, including by protecting infrastructure investment and well-targeted social expenditure, while cutting non-priority spending.

“Further, monetary policy will need to manage the trade-off between supporting growth and keeping inflation expectations anchored in the face of currency depreciation and volatile commodity prices. Maintaining exchange rate flexibility is critical to withstand shocks,” he added.

He said in Central America and the Dominican Republic, economic activity is projected to pick up in 2019-20, but at a slower pace than originally anticipated.

“The major revisions took place in Costa Rica where a fiscal reform Bill was passed in December. While this was a critical step towards re-establishing fiscal sustainability, it will lower growth in the near term. In Nicaragua, social unrest and political uncertainty have also hurt growth prospects,” Werner said.

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