BASSETERRE, St. Kitts – RECOVERY for Latin American and Caribbean (LAC) economies is within reach, but there are a few policy challenges that remain, according to the latest Regional Economic Outlook Report produced by the International Monetary Fund (IMF).
The report, entitled ‘Crisis Averted – What’s Next?’, was launched in Brazil on Friday (Oct. 23) and assesses the economic recovery of countries within Latin America and the Caribbean.
In late 2008, countries within the region began to feel the squeeze after many of the world’s largest countries declared economic recessions. Within months, the region witnessed reduced exports and significant drops in remittances and tourism receipts, ultimately translating into mass unemployment and negative economic growth.
However, according to the latest IMF report, the LAC region is expected to recover with a three percent growth in 2010, a favourable rebound compared to the 2.5 % contraction experienced this year.
According to an IMF communiqué, Director of the IMF’s Western Hemisphere Department Nicolas Eyzaguirre said that the LAC region as a whole has done considerably better this year than in past global crises and recessions.
“It is true that Latin America fared much better during this crisis than in the past,” he said. “The question, now that the worst of the storm is behind us, is how to adjust policies to the new reality of a more sluggish global economy and still provide conditions for growth and poverty alleviation.”
After thorough assessment, the report informed that countries that are net exporters of commodity (including Brazil, Chile, Colombia and Mexico) have a “favourable near-term outlook” given the ongoing recovery of commodity prices.
Closer to home, the report indicates that the Caribbean is at some disadvantage as it depends on tourism, which is linked to employment conditions in the U.S. and other advanced economies that are likely to experience very slow recovery.
Some degree of caution was noted in the report, as it warned that LAC countries will face two major challenges.
The IMF report reads, “Policies will need to adjust to a new global reality of lower growth over the medium term, as a return to pre-crisis growth rates is unlikely. In this context, policies will need to better prioritize public expenditures, provide conditions for domestic growth, and reduce poverty.”
Another concern was the need to advance the reform agenda to improve its resilience and preparation for future shocks. The report added that the benefits of implementing sounder policies in these areas were confirmed by the region’s “relatively good performance” amid this year’s global turmoil.
Work of the Eastern Caribbean Central Bank’s Monetary Council has produced an eight-point stabilization plan that seeks to address the concerns stated in the IMF report.
The stabilization programme includes enhanced fiscal policy frameworks, financial regulation and supervision practices and the maintenance of social safety nets during uncertain economic times.
