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IMF expects LatAm to have negative economic growth this year

Xinhua, April 13, 2016 Adjust font size:

The economy of Latin America and the Caribbean is expected to shrink by 0.5 percent this year, due to low prices of crude and other raw materials, the International Monetary Fund (IMF) said in its latest forecast on Tuesday.

The downturn in Brazil was deeper than expected, while activity for the remainder of the region was broadly in line with the forecasts released in January, the IMF said in its World Economic Outlook report.

The IMF modified its projection for Brazil in 2016 to a negative growth of 3.8 percent, compared with the projected contraction of 3.5 percent in January.

If the forecasts are true, it will be the first time the South American nation registers a negative growth for two consecutive years since 1930.

In 2015, Brazil, the largest economy in Latin America, saw a contraction of 3.8 percent, the worst in 25 years.

According to the predictions, Venezuela is set for at least another two years of "deep recession" with a contraction of 8 percent this year, followed by a contraction of 4.5 percent for 2017.

The forecast for Ecuador is "highly uncertain" and will depend greatly on external financing. Taking this into consideration, negative growths of 4.5 percent and 4.3 percent are predicted for 2016 and 2017, respectively.

Despite efforts by Argentina's new government to correct the distortions, which have improved the country's prospects, "it is possible that the adjustment could bring about a recession," the report said.

It forecasts a contraction of 1.0 percent for Argentina in 2016 and an economic growth rate of 2.8 percent in 2017.

Chile also had its 2016 forecast cut from a growth rate of 2.1 percent in January to 1.5 percent in the latest report.

The IMF said the projections for Chile are based on "the price of copper and tighter financial conditions." For 2017, Chile is expected to have a growth rate of 2.1 percent.

The IMF still expects Mexico to have a relatively modest economic growth in 2016 and 2017, at 2.4 percent and 2.6 percent, respectively.

The organization adjusted its projections for Mexico by 0.2 percentage point from the previous forecast. It said the nation's economy will have "a moderate pace of expansion" even though in the long-term it could register a growth rate of 3.1 percent from 2021.

Bolivia has the best growth forecast at 3.8 percent, largely thanks to its strong manufacturing sector. It was followed by Peru at 3.7 percent.

The world organization noted the "substantial" differences between regions and countries at a general level in the report.

It said the South America region is "very affected" by the fall in the prices of raw materials. Meanwhile, Mexico, Central America and the Caribbean have benefited from the U.S. economic recovery.

Despite the mixed scenario, the IMF said Latin America is expected to expand once again in 2017, by 1.5 percent. Endi