The International Monetary Fund (IMF) has cut its forecast of economic growth in Latin America and the Caribbean, saying global trade tensions and the recessionary business climate in Argentina and Brazil will weigh on the economic performance of the region.
The LatAm economy will grow 1.2% in 2018 and 2.2 % in 2019, according to the IMF World Economic Outlook. Higher oil prices and the increased political uncertainty are also among the factors hurting growth in some countries.
However, there is some good news to celebrate as well. Caribbean countries are reaping the dividends of economic growth in the United States, the bank said, pointing to the uptick in the number of Americans travelling to the picturesque island nations in the region.
Andean economies, such as Colombia, Chile, and Peru, have remained buoyant, largely due to the growing consumer and business confidence in addition to past trade deals.
More than anything else, private investment is growing. Having contracted for three years in a row, private investment increased in the last quarter of 2017 and in the first quarter of 2018, according to the report.
“Despite the slowdown in regional economic activity, private investment is showing signs of life,” said Alejandro Werner, Director of the IMF’s Western Hemisphere Department, adding that the investment will “continue supporting the recovery this year and next.”
While the Argentine economy is expected to continue contracting for a few more years, the authorities’ new push for stabilization should improve macroeconomic prospects in the medium run, says the bank.
Despite this, it has expressed optimism about Mexico’s growth, despite the lingering uncertainty on the final draft of the North American Free Trade Agreement (NAFTA).
Growth in Central America has shown signs of deceleration since the beginning of 2018, driven by worsening terms of trade and subdued domestic demand.