The International Monetary Fund (IMF) through a report entitled “The Americas: Navigating more restrictive financial conditions” said that recent economic developments in the Americas – the United States, Canada, and Latin America and the Caribbean – have been dominated by the impact of two different global shocks: the Covid-19 pandemic and then Russia’s invasion of Ukraine. Added to these impacts is a third shock: the tightening of financial conditions.
Amid global monetary and financial tightening, and the associated slowdown in global growth and moderation in commodity prices, activity is projected to slow across the Americas region in late 2022 and into 2023, as time that inflationary pressures are expected to ease gradually.
Downside risks dominate the outlook, linked to tighter financial conditions, a sharper global slowdown, and entrenched inflation.
The document reduced growth forecasts for Latin America and the Caribbean, which would go from growing 3.5% this year to 1.7% next. And in the case of Argentina, specifically, it forecasts that the activity will expand 4% in 2022 to be reduced to 2% next year.
In this context, “a drastic fall in commodity prices and social unrest are important risks. Given that inflation has not yet subsided, and that most economies continue to operate at or near their potential level, it should avoid a premature relaxation of monetary policy, which must remain on course”.
Growth momentum continues in Latin America and the Caribbean and the region is forecast to grow 3.5% in 2022. But given the tightening of global financial conditions, growth is projected to slow to 1.7% in 2023”, concluded the report presented in Santiago de Chile by Nigel Chalk, acting director of the Western Hemisphere Department of the IMF; Gustavo Adler, Head of the Regional Studies Division; and Ana Corbacho, Head of Mission for Chile.
The case of Argentina
In the same way, the agency warned that domestic weaknesses, as well as a more challenging global context, aggravate Argentina’s prospects. “In Argentina, domestic vulnerabilities and policy uncertainty, coupled with a worsening external environment, are worsening the outlook,” says the document prepared by the IMF’s Western Hemisphere Department, led by Ilan Goldfajn.
It adds: “The adoption of more restrictive policies under the IMF-backed program will be essential to underpin stability and contain inflation, which is now projected to rise to 95 percent by the end of 2022.”
Regarding the forecasts for the Argentine economy, specifically, the fund expects economic activity to expand 4% in 2022 to reduce to 2% next year.
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