Region’s growth prospects improved despite risks

TIMES INT'L

The International Monetary Fund (IMF) says that while the growth prospects for Latin America and the Caribbean looks good, there remains “significant risk” of overheating economies in the region.

In the latest edition of its World Economic Outlook, the Washington-based financial institution said the region’s economies are expected to grow 4.2 per cent in 2012, on par with overall 4.5 per cent global next year. The latest IMF prospects show improvements of 0.4 percentage points for this year and 0.1 percentage points for next year, with respect to the previous outlook.

It said the main reason for the upward revision is “greater confidence in the strength of the global recovery and improved prospects for commodity prices”. The IMF said though growth prospects for 2011 are modest in comparison to last year’s figure of 6.1 per cent, they remain well above those for more advanced economies.

Brazil, Latin America’s largest economy, as well as the world’s eighth-largest, is to grow 4.5 per cent this year and 4.1 per cent in 2012, compared to 7.5 per cent in 2010, the IMF said. It said economic conditions in Central America and the Caribbean are improving, “with the recovery in outside demand and rebound of remittances from expatriates”.

Prospects for Central America stand at four per cent this year and 4.3 per cent next year, after last year’s growth of 3.6 per cent; while growth in the Caribbean is forecast at 4.2 per cent this year and 4.5 per cent in 2012, after last year’s 3.4 per cent, the IMF said.

“The LAC region (Latin America and the Caribbean) has weathered the global recession well, and must now contend with the policy challenges of managing two strong tail winds – high commodity prices and strong capital inflows,” the IMF said, warning, however, that “deficits are widening and are projected to continue widening on the back of robust domestic demand. “Macroprudential policies need to focus on maintaining and enhancing the resilience of these economies to potential problems from accelerating domestic credit and significant capital flows,” the IMF said.

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