IMF revises Latin America growth forecast up to 4 1/4 percent

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Latin America and the Caribbean are expected to enjoy robust growth for the third successive year, helping achieve further reductions in unemployment and poverty, according to Anoop Singh, Director of the IMF's Western Hemisphere Department. Real growth in 2006 is now projected to average about 4 1/4 percent-about 1/2 of 1 percentage point higher than the IMF forecast in the spring-and to stay in the 4 percent range in 2007, Singh told reporters in Singapore on September 16 (see table). The moderating trend over the next 12 months reflects the more measured global expansion, the projected easing of commodity prices, and the maturing of strong recoveries in several countries.

Singh, who mentioned that a fuller briefing on the region's outlook would be presented at the Latin American and Caribbean Economic Association meeting in Mexico City in early November, said the region continued to benefit from a favorable global environment, including strong commodity prices. Between 2002 and 2006, primary fuel and nonfuel commodity prices have risen by some 170 and 70 percent, respectively. Although higher world oil prices have placed a difficult burden on a number of countries, the broad-based boom in commodity prices has helped many countries in the region achieve large trade and current account surpluses and accumulate external reserves, he stated. Favorable global financing conditions and continuing record-low sovereign spreads have also sustained the growth momentum, notwithstanding some bouts of financial market volatility in the first half of the year.

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"The favorable global environment and sustained economic recovery provide the region with a rare historical opportunity."

-Anoop Singh

"Encouragingly, growth has generally been quite broad-based, and domestic demand is expected to remain the main driver of the expansion in the near term. Private consumption is projected to account for more than two-thirds of regional growth in 2006 and 2007, and private investment ratios are set to increase further," Singh said.

Hard-won improvements in macroeconomic stability have provided an important...