The International Monetary Fund (IMF) has cut Latin America and the Caribbean’s economic growth outlook by 0.6% to 2.4%, pointing to rising inflation and tightening monetary policy in Brazil and Mexico.
The fund has lowered Brazil and Mexico’s growth forecast cut by 1.2 percentage points each to 2.8% and 0.3%, respectively.
The hike in interest rate will weaken purchasing power and, in addition, slowing the US economy will also have an impact on the region’s economic prospects, the fund added.
“…There has been a sizable increase in monetary policy rates in Brazil, quite substantially, to address the inflation pressures, and the effect of that we expect will show up in 2022, and therefore that’s another reason for the downgrade,” said Gita Gopinath, IMF’s economist in a media briefing.
Rising COVID infections and supply chain disruptions are the factors driving down demand in Mexico. But the Mexican economy is expected to achieve close to 3% growth in 2023.
“In the case of Mexico, what we have is, again, the last two quarters that came in weak — the second half of last year that came in weaker than expected because of, again, supply disruptions and so that carries forward a bit to 2022,” Gopinath added.
Considering the report, Argentina’s economy is estimated to grow 3.3 in 2023. Meanwhile, IMF is in talks with the Argentinean government over the refinancing of around $40 billion.