According to the International Monetary Fund, Latin America (Latam), will continue growing in this year. It is expected that it will grow at 3% despite all the challenges that the country is currently facing. The International Monetary Fund believes the Latam economic recovery after the Covid-19 outbreak will be slowed by several factors including rising inflation, macroeconomic conditions, increased social tensions and growing food insecurity.
IMF Forecasts Latam to Keep Growing
A series of forecasts by the International Monetary Fund have shown the likely growth of Latam in 2022 and what possible problems it will face. All variables have been considered and the International Monetary Fund predicts that there will be a 3.3% increase in the region’s growth by 2022. It is fueled by economic recovery, as well the reopening many of the industries which were affected by Covid-19.
This forecast, while higher than the one made by the International Monetary Fund earlier in the year, is still lower than the 2.5% prediction. The fund warns that Latam will face many challenges in coming years despite this positive forecast.
This includes the changing macroeconomic and inflationary conditions in the world, as well as the rising tensions within the region. The International Monetary Fund decided to lower its forecast for growth to 2.5% by 2023.
Shifting Global winds
These factors have been highlighted by the organization, with global deceleration and inflationary pressures being the main. The institution predicts that inflation will continue to rise and surpass previous records. According to it:
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.
This all will make policymaking and regulation difficult in the next months. Legislators will need to strike a balance between economic stability and the social policies that aid those in trouble, and avoid social crises or institutional stability issues.
Latam faces many difficulties, and the International Monetary Fund doesn’t seem to be the only one concerned. 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.”
Let us know your thoughts on the most recent predictions by the International Monetary Fund regarding Latam. Leave a comment below.
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