BASETERRE, St. Kitts - THE International Monetary Fund (IMF) has projected that the Latin America and Caribbean region (LAC) would see a decline in economic growth for this year before an increase in 2025.
That announcement was made yesterday (Jan 30) during a press conference in South Africa, where the World Economic Outlook was released, which is an update to the previous one in October in which the overall data for the world showed a slight increase was projected.
“In Latin America and the Caribbean, growth is projected to decline from an estimated 2.5 percent in 2023 to 1.9 percent in 2024 before rising to 2.5 percent in 2025, with a downward revision for 2024 of 0.4 percentage point compared with the October 2023 WEO projection,” the IMF said in its outlook projections.
The statement pointed to growth for larger economies in Latin America, such as Brazil (0.2 percent) and Mexico (0.6 percent), while Argentina would see a decline.
Much of the growth in the large economies, according to the IMF, is “largely due to carryover effects from stronger-than-expected domestic demand and higher-than-expected growth in large trading-partner economies in 2023”.
Overall world growth is projected at 3.1 percent in 2024 and 3.2 percent in 2025, with the 2024 forecast 0.2 percentage point higher than that in the October 2023 World Economic Outlook (WEO).
This growth is due to greater-than expected resilience in the United States and other large emerging markets and developing economies, as well as fiscal support in China.
Pierre-Olivier Gourinchas, Chief Economist and Director, Research Department at the IMF, noted during the press conference that the global economy continues to display “remarkable resilience, with inflation declining steadily and growth holding up”.
Those improvements have resulted in “a soft landing” which has increased the chances of further economic growth. However, Gourinchas reminded that the pace of expansion remains slow, while risks remain ever present.
“On the demand side, global activity was supported by stronger private and government spending, despite tight monetary conditions. On the supply side, increased labor force participation, mended supply chains, and cheaper energy and commodity prices helped, despite renewed geopolitical uncertainties. Global growth under our baseline forecast will be steady at 3.1 percent this year, a 0.2 percentage point upgrade from our October projections, before edging up to 3.2 percent next year. Important divergences remain,” the economist told reporters.
Challenges remain for two of the world’s largest economies, China and the United States, which can have spillover effects for smaller economies like those in the Caribbean.
“We expect slower growth in the United States, where tight monetary policy is still working through the economy. And in China, where weaker consumption and investment continue to weigh on activity. In the Euro area, activity is expected to rebound slightly after a challenging 2023, when high energy prices and tight monetary policy restricted demand. Many other economies continue to show great resilience, with growth accelerating in Brazil, India, and Southeast Asia's major economies. In Sub-Saharan Africa, growth is projected to rise, as the negative effects of earlier weather shocks subside, and supply issues gradually improve,” Gourinchas explained.
In the area of inflation, which continues to bite across the world, the chief economist revealed that this continues to ease with the figure expected to drop by 0.4 percentage points to 4.9 percent this year from October's projections.
This is a welcome sign for the Federation as much of what is consumed is imported and that inflation, according to Prime Minister Dr. Terrance Drew, is what has resulted in the uptick of prices on the shelves.
“For advanced economies, inflation will average around 2.6 percent this year, close to Central Bank targets,” added Gourinchas.
With the improved outlook, risks are now broadly balanced. On the upside, disinflation could happen faster than anticipated, allowing central banks to ease sooner, the chief economist noted.
However, the real world challenges remain ever present with geopolitical issues remaining on the front burner, such as the Middle East tension, with increased attacks on ships in the Red Sea, could hamper commodities and the supply chains.