It is expected that Latin America and the Caribbean will grow 2.5% this year, far from the 6.8% registered in 2021. In the case of Argentina, would go from an increase of 10.2% to 4%.
For Brazil the prognosis is that expansion will be reduced to 0.8% this year, after the growth of 4.6% observed last year. The economy of Mexico will slow down to 2%. Colombia will probably experience a smaller slowdown with growth of 5.8%. Growth in Chile and Peru will be 1.5% and 3%, respectively, “indicating very important reductions compared to the two-digit rates of the previous year.”
“The war in Ukraine is convulsing the world economy and raising uncertainty around the perspectives of Latin America and the Caribbean”, says the report. He specifies that the impact on the region “it is felt through the increase in inflation, which is affecting real incomes, especially of the most vulnerable”.
risks
Also note that other risks looming. In this regard, he maintains that a possible escalation of the war could lead to global financial difficulties and a tightening of financial conditions in the region.
In addition, it considers that the current tightening of monetary policy in the United States could, over time, affect international financial conditions. Rising global and domestic financing costs can accelerate capital outflows and pose a challenge for the regiongiven the great needs for public and external financing in some countries, and the limited resources to finance investments.
In the field of risks, it is noted that a sharper slowdown in growth in Chinadue to the pandemic or other reasons, also could have an impact on the prices of key exports and on trade in the region.
The work reports that even before the war, the region’s recovery from the pandemic was already losing momentum. He states that, after last year’s sharp risegrowth is returning to its pre-pandemic trend rate slowing to 2.5% in 2022 and the same rate for 2023.
It so happens that, although exports and investment are resuming their role as the main engines of growth, central banks have had to tighten monetary policy to combat rising inflation.
vulnerable
“Poverty and inequality remain major concerns, given the uneven impact of rising inflation on the population”holds the paper.
It points out that the most vulnerable groups in the region are the hardest hit by rising prices for basic food and energy, while still struggling to recover from the economic impact of the pandemic.
Since the war broke out, several countries in the region have acted to contain the effects of rising prices on vulnerable groups, with measures ranging from the reduction of taxes and import tariffs up to price limits or social transfers.
The IMF calculates that Close to 40% of the countries have introduced new measures, especially on the tax side, with an estimated average fiscal cost equivalent to 0.3% of gross domestic product this year.
In the field of political recommendations, the work affirms that in order to guarantee social cohesion and reduce the risk of social tension, Governments should provide targeted and temporary support to low-income and vulnerable households. Argentina carries out these types of policies, such as the recently announced bonds to serve informal and low-income sectors.
But it also recommendslet domestic prices adjust according to international prices”.
The Fund insists that the consolidation of public accounts must be combined with inclusive policies. With public debt/GDP ratios above pre-pandemic levels and rising financing costs, “Countries will have to guarantee the sustainability of public finances to help preserve their credibility and rebuild fiscal space”.
But he adds that “It will also be important to adopt measures that protect the most vulnerable, for which a strategy that focuses on inclusive consolidation will be necessary.”
In this sense, he states that “spending on social programs, health, education and public investment must be protected, while tax reforms are implemented (such as the increase in personal income taxes) that underpin inclusive growth and help countries maintain fiscal sustainability.”
Source: Ambito
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