Non-economic Factors Could Derail LatAm Recovery: IMF

Heightened economic risks externally—notably, a shift towards more protectionist policies and a sudden tightening of global financial conditions—could also weigh heavily on growth prospects.

IMF LatAm

The International Monitory Fund (IMF) has warned that non-economic factors, such as extreme weather events and upcoming elections in Mexico and Brazil, could derail economic recovery in Latin America and the Caribbean.

“Heightened economic risks externally—notably, a shift towards more protectionist policies and a sudden tightening of global financial conditions—could also weigh heavily on growth prospects,” stated the IMF in its economic forecast.

The IMF estimates that regional GDP growth will accelerate to 2.0% this year and 2.8% in 2019. Growth for 2017 is expected to come in at 1.3%, thanks mainly to a resurgent Brazil and Argentina.

Despite this rebound, investment levels are expected to remain below the levels seen in other regions, limiting the region’s growth potential.

To secure more durable growth, the bank has suggested investing more in key sectors, like infrastructure and education.

With Mexico’s presidential election looming, and the ongoing renegotiation of the North American Free Trade Agreement (NAFTA), business leaders have been forced to rethink their investment decisions in the country.

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Furthermore, in Brazil, while the IMF expects growth of 2.3% in 2018, thanks to favourable external conditions and a rebound in private consumption and investment, it still predicts potential issues.

“A key risk is that the policy agenda could change following the October presidential election, giving rise to market volatility and greater uncertainty about the medium-term outlook.”

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