MIAMI (HPD) — The Latin American economy has improved more than expected in 2022 and is going through a good time, but growth levels are similar to those of more than a decade ago and good winds are not in sight for 2023, said the Thursday the International Monetary Fund.
The region is still dealing with the effects of the coronavirus pandemic and the Russian invasion of Ukraine, and is now facing a third shock: the tightening of international financial conditions.
The good news, the IMF said, is that growth of 3.4% is expected by the end of this year, 1% higher than expected at the beginning of 2022.
The bad news is that the world economy is going to slow down in 2023 due to an unfavorable international context, with a contraction in economic activity in China and the United States, the continuation of the war in Ukraine, high interest rates and weaker financial conditions. tight to access credit. All this means that the IMF’s growth forecasts for the region in 2023 fall to 1.7%, half that of this year.
In 2020 the Latin American economy contracted to -6.6% growth, and in 2021 it recovered to 7%.
The IMF released its forecasts in a blog published on Wednesday, at a time when countries in the region have already begun to feel the impact with high inflation rates, and just over a week after the World Bank revealed its own forecasts. , slightly lower. For this year, the World Bank forecasts a growth of 3% in Latin America, and 1.6% in 2023.
In the blog, the Fund explains that capital flows to emerging countries are slowing down and the cost of external financing is increasing. For Latin America, the effect is seen mainly in a slowdown in activity, an impact on the cost of domestic credit, private consumption and investment, among other things.
In this context, governments should take measures to control inflation. The goal should be to moderate or cushion its impact on lower-income sectors, and not last long, Ilan Goldfajn, director of the IMF’s Western Hemisphere department, told The Associated Press.
“The monetary policy, the fiscal policy of individuals and the authorities have to have inflation as a primary objective”, considered the economist. “Inflation is like a regressive tax that charges more to those who have less … so working to combat inflation is the most important thing that countries can do.”
The IMF forecasts that Chile will end this year with an inflation of 12.2% and the next with 6.2%; Colombia with 11% in 2022 and 6% in 2023; Mexico with 8.5% and 4.8% respectively; Peru with 6.8% in 2022 and 3% in 2023; and Brazil with 6% and 4.7% respectively.
According to IMF forecasts, the Brazilian economy, which grew by 4.6% in 2021 after falling to -3.9% in 2020, will regress to 2.8% growth in 2022 and 1% in 2023.
Chile’s Gross Domestic Product, which contracted -6.1% in 2020 and recovered ground to 11.7% in 2021, will fall to 2% this year and contract -1% next year. Colombia, which fell to -7% in 2020 and advanced to 10.7% in 2021, will lower its activity to 7.6% this year and to 2.2% in 2023, while Mexico will decrease its GDP by 4 .8% in 2021 to 2.1% in 2022 and 1.2% in 2023. Peru, whose economy fell to -11% in 2020 and advanced to 13.6% in 2021, will plummet again to 2.7% this year and will remain almost the same in 2023, at 2.6%.
To cushion the impact on the population, Goldfajn recommends that governments focus on the most vulnerable and low-income sectors and avoid programs that reach the entire population.
“We are telling the countries that they have to worry about what is coming,” said the economist, after listing some of the challenges, such as high interest rates, more pressure on the balance of payments and less capital flow, among others. . “We’re telling them to worry about inflation, and there’s a shock coming, and next year they’re going to have lower growth.”