Latin America Shows Signs of Renewed Growth
| Author | International Monetary Fund |
Latin America as a whole is likely to have resumed growth in the third quarter of this year, and we expect growth to pick up moderately in 2010 in line with the global economy," Nicolas Eyzaguirre told a press briefing at the IMF-World Bank Annual Meetings in Istanbul, Turkey on October 4.
For the United States, the IMF projects that recovery will be very gradual and growth is expected to remain weak over the next several years. Also, employment conditions will likely get worse before they start to improve. Reflecting the damage from the financial and housing crises, a permanent loss in potential output and the very large increase in debt levels in the U.S. will be negative legacies of the crisis that could adversely affect the Latin America and Caribbean region.
Eyzaguirre said the impact of the global recession on the Latin America and Caribbean region has been substantial, reflecting the severity of the recent global shocks. Initially, the global crisis sent wide-ranging shocks through a drop in exports, workers remittances, and tourism receipts; an increase in the cost of external funding; and a reversal of capital inflows.
Moreover, the mounting uncertainty dented confidence and the private sector pushed back its spending decisions. But IMF analysis shows that the region was better prepared to weather such shocks than in the past, entering the cycle with more comfortable fiscal and external positions, much more resilient financial systems, and stronger and more credible policy frameworks.
"This preparedness has paid off. In contrast with past episodes of global stress, the region avoided crises in the financial system and the balance of payments. In addition, many countries were able to implement active policy measures to partly offset the impact of the large external shocks on output," Eyzaguirre told reporters.
Still, throughout the region, aggregate demand slowed or contracted, opening sizeable output gaps and leading to increases in unemployment in several countries. But performance on average has been better than in many other emerging market countries this year. "Latin American countries with the strongest policy frameworks have been able to perform considerably better than in the past. Our estimates suggest that the output loss of these countries could have been up to 4 percent larger if they had not taken the steps that...
To continue reading
Request your trial