IMF slightly upgrades Latin America's growth outlook

Globally, the economy is likely to grow 6% in 2021 – a pace not seen since 1976, all because of the COVID-19 pandemic stimulus

The International Monetary Fund (IMF) logo is seen outside the headquarters building in Washington, U.S., September 4, 2018. Photo: Reuters/Yuri Gripas.File Photo
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  • In its Global Economic Perspective report, the IMF estimated a 4.6% expansion for Latin America and the Caribbean this year – 0.5 percentage point more than in the January estimate;
  • Brazil, the main Latin American economy, will present an advance of 3.7% this year, a positive adjustment of only 0.1 percentage point.

Latin American economies are likely to grow a bit more than expected in 2021 thanks to economic activity recovery among raw material exporters. The recovery, however, does not work homogeneously throughout the region, and the lack of vaccines against the coronavirus remains an obstacle, the International Monetary Fund (IMF) said on Tuesday.

In its Global Economic Perspective report, the IMF estimated a 4.6% expansion for Latin America and the Caribbean this year, an improvement of 0.5 percentage point from the January estimate. In 2022, the region will grow 3.1% after suffering a 7% contraction last year.

IMF, World Economic Outlook, April, 2021.

Brazil, the main Latin American economy, will present an advance of 3.7% this year, a positive adjustment of only 0.1 percentage point in the face of the pandemic’s strong impact, said the IMF. In 2022, an expansion of 2.6% is expected.

READ ALSO: Brazil and Mexico currencies in somber mood as pandemic roars on

The report also adjusted Mexico‘s growth forecast to 5% this year and 3% in 2022. The result derives from the country’s export capacity and its strong trade ties with the United States, where this year one of the expansion rates is expected stronger in at least four decades.

“With a few exceptions, such as Chile, Costa Rica, and Mexico, most countries have not guaranteed enough vaccines for all of their populations,” said the IMF, which called for increased contributions to distribute vaccines from the Covax Facility consortium to resource-poor nations.

According to the report, Argentina‘s economy, which contracted 10% last year according to the Fund’s calculations, will grow 5.8% in 2021 and 2.5% next year.

The report drew attention to the increase in inequality and estimated that 95 million people fell into extreme poverty worldwide in 2020.

READ ALSO: Brazil inflation rises to multi-year high driven by strong rises in transport and housing costs

Worldwide, the forecasted growth is higher than that of decades ago

The IMF also raised its outlook for global economic growth, forecasting a worldwide output rise of 6% this year, a rate unseen since the 1970s, thanks largely to the unprecedented policy responses to the COVID-19 pandemic.

From 5.5% less than three months ago, that upgrade largely reflects a rapidly brightening outlook for the U.S. economy, which the IMF now sees growing by 6.4% in 2021, the fastest pace since the early 1980s. That’s up 1.3 percentage points from the IMF’s 5.1% projection in late January and nearly double the rate it estimated in October.

The IMF forecast, if realized, would mark the fastest pace of global growth since 1976 but also comes off the steepest annual downturn of the post-war era last year as the pandemic brought commerce around the world to a near stand-still at times.

The fund said the world economy contracted 3.3% in 2020, a modest upgrade from an estimated contraction of 3.5% in its January update.

IMF, World Economic Outlook, April, 2021.

The latest World Economic Outlook – released at the start of the IMF’s and World Bank’s spring meetings – reflects a dramatic divergence between the outlook for the United States and much of the rest of the world courtesy of another $1.9 trillion in pandemic relief spending recently enacted in Washington.

The outlooks for other advanced economy heavyweights, such as Germany, France and Japan, hardly improved at all since January. Nonetheless, with the heft of the U.S. outlook improvement as the main driver, the IMF marked up its advanced economy growth estimate to 5.1% from 4.3%.

READ ALSO: Mexico’s economy seen at pre-pandemic levels in early 2022

Forecasts for emerging market economies, while somewhat improved, took a back seat to their developed peers. The fund’s outlook for EM economies rose by just 0.4 percentage point – half of the advanced economy mark-up – to 6.7% from the view in January.

“(M)ultispeed recoveries are under way in all regions and across income groups, linked to stark differences in the pace of vaccine rollout, the extent of economic policy support, and structural factors such as reliance on tourism,” the IMF said in its report summary.

The United States economy this year will join China in regaining a level of gross domestic product that exceeds where it stood before the pandemic struck just over a year ago, the IMF said. China recaptured all of its lost growth by the end of 2020.

The IMF emphasized the high degree of uncertainty surrounding the outlook. Improvement could easily be tripped up by several factors, with success against the pandemic topping the list. “Greater progress with vaccinations can uplift the forecast, while new virus variants that evade vaccines can lead to a sharp downgrade,” it said.

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