Economic outlook is bright across the globe

• Pages: 101-109

Page 101

In Asia, Africa, Europe, and Latin America and the Caribbean, the economic forecasts are pretty much the same: growth is strong, especially in China, and will continue, and inflation is mainly under control. The regional economic forecasts prepared by the IMF all caution that a sharper-than-expected decline in the United States could dampen growth, but are upbeat about regional prospects. Even so, at current rates Africa will fail to reduce poverty enough by 2015 to reach its Millennium Development Goals.

Page 109

Latin America enjoys longest sustained growth in 30 years

Latin America is in the middle of its strongest expansion since the 1970s, and the outlook remains favorable for sustained growth. For most countries, the outlook for inflation is favorable too, according to the IMF's regional economic outlook for the Western Hemisphere.

The good performance has resulted from a combination of generally sound economic policies and a benign international economic situation, including high commodity prices, that have enabled many countries to raise spending and still reduce deficits, the report said.

As a result of the strong growth, unemployment rates and poverty rates fell and, for the first time in decades, there was a moderate reduction in regional income inequality. However, inequality remains quite high compared with much of the rest of the world, according to the outlook, prepared twice a year by the IMF's Western Hemisphere Department.

Overall, economic growth was 5.5 percent in the Latin American and Caribbean (LAC) region last year and has averaged 5.25 percent for the past three years (see Chart 1).

Growth is expected to slow a bit this year, to just under 5 percent, and to about 4.25 percent next year, a reflection of "a deceleration from historically high rates in a number of countries, the slowdown in the U.S. economy, and some declines in commodity prices." Real GDP growth in the United States is forecast to be 2.25 percent in 2007 compared with 3.3 percent last year. The slower U.S. growth also affects Canada, which is forecast to grow 2.5 percent this year.

Inflation declined in most LAC countries last year, to a regional average of 5 percent, and is expected to rise only slightly in 2007 (see Chart 2). But the IMF noted that the "decline was not universal." In several countries, "inflation accelerated or remained high as economic activity...