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IMF: Latin American, Caribbean Economies in Low Gear in 2014

On Tuesday April 8, 2014, the International Monetary Fund released its World Economic Outlook. From the discussions, the IMF believes that the global economy will be supported by the stronger performance of the advanced economies, particularly that of the United States.

Expectations for an improved economic outlook in the United States is likely to outstrip the weakness in some of the emerging markets, such as some of the infamous BRIC economies, as well as weakness in Japan and Europe. Overall World Output growth of 3.6 percent is projected for 2014, further increasing to 3.9 percent in 2015 from 2013’s growth of 3.0 percent.

Indeed, expectations for the emerging market and developing economies are muted, when compared to previous years, with growth of 4.9 percent forecasted for 2014 and 5.3 percent for 2015. In 2012, output in these economies was registered at 5.0 percent.

Economic activity in the Latin American and Caribbean region is expected to remain subdued in 2014 and 2015, constrained by lower commodity prices, tighter financial conditions and supply bottlenecks in some countries. The IMF also noted that growth in the Caribbean region remains inhibited by high indebtedness as well as weak competitiveness.

The LAC region is forecasted to post growth of 2.5 percent in 2014 from an estimated 2.75 percent in 2013. Within the Latin American region, performances will be mixed, with expectations for Mexico on the optimistic side due to the country’s ongoing reforms in the energy and telecommunications sectors, which will boost medium-to-long-term economic prospects.

Colombia, Peru and Chile are also expected to experience an uptick in economic growth because of fairly strong domestic consumption underpinned by low jobless rates as well as solid growth in real wages. On the flipside, Brazil is expected to remain in “low gear” with growth projected to slow to 1.8 per cent in 2014 from 2.3 per cent in 2013.

The Brazilian Central Bank in April decided to end its monetary tightening cycle in an effort to shift policy from tempering inflation to boosting economic growth as private investment remains weak. Argentina and Venezuela are both expected to underperform as “loose macroeconomic policies have generated high inflation and a drain on foreign exchange reserves.”

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