The economy of Latin America and the Caribbean will grow 2.5% in 2022, but the war in ukraine uncertainty increased and prices shot up, reiterates this Tuesday the IMF publishing its perspectives for the region.
The war after Russian invasion of Ukraine “is convulsing the world economy and raising uncertainty about the prospects for Latin America and the Caribbean“, states the IMF in a blog post.
Although the agency anticipates that Brazil grow 0.8%, Mexico 2%, Colombia 5.8%, Chile 1.5%, Peru 3% and Argentina 4% this year, this represents “very important reductions compared to the two-digit rates of the previous year”.
By zones, South America will grow 2.3% this year and Central America, Panama and the Dominican Republic 4.8%. For the Caribbean, he distinguishes between the economies dependent on tourism, badly affected by the pandemicwith 3.2%, and the exporters of raw materials (Guyana, Suriname and Trinidad and Tobago) that take the best part, with 20.2 percent.
“lose momentum”
Even before the war, the recovery of Latin America and the Caribbean “I was already losing momentum.”
The impact is now being felt through rising prices, forcing countries to adopt measures “to cushion the blow on the most vulnerable and contain the risks of social tension.”
Various nations have reacted with measures ranging from “reducing taxes and import tariffs up to price limits or social transfers”.
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“, he points out.
To reduce the risk of social tension, governments should support low-income households “and let domestic prices adjust according to international prices,” recommends the IMF.
Other risks are coming, in addition to inflation, warns the IMF, which cites a possible escalation of the war or the rise in interest rates in USAwhich could fuel an outflow of capital from a region in need of investment.
The blog’s authors —Santiago Acosta-Ormaechea, Ilan Goldfajn and Jorge Roldós— advocate protecting “spending on social programs, health, education and public investment,” while “tax reforms are implemented.”