IMF: Latin America’s Recovery on the Right Track

The Update of the Regional Economic Outlook for the Western Hemisphere, published by the International Monetary Fund (IMF), raised its growth forecasts for Latin America and the Caribbean to 1.2% in 2017 and 1.9% in 2018. A favorable external environment is aiding the recovery. Global demand is strengthening, and easy global financial conditions—low volatility in global markets and resilient capital inflows—are boosting domestic financial conditions.At the same time, inflation is moderating in many countries as the effects of previous currency depreciations on domestic prices wane, some currencies appreciate, and economic slack (the amount of labor and capital that remains idle) continues. Regional inflation is expected to fall to 4.2% in 2017 (down from its peak of 6.2% in 2015) and remain around 3½% thereafter.
Despite this ongoing recovery, the prospects for strong long-term growth in Latin America and the Caribbean appear bleaker. Over the next 3-5 years, Latin America is expected to grow 1.7% in per capita terms. This growth rate is almost identical to the region’s performance over the past 25 years and only marginally better than that of advanced economies, raising concerns that the region is not catching up to the income levels of advanced countries.
After entering positive territory in the first half of 2017, growth in Brazil is expected to reach 0.7% for the entire year and 1.5% in 2018.