LIMA, Peru
Latin America’s growth in 2014 will be it’s slowest in five years, the International Monetary Fund said Tuesday, after lowering growth forecasts for the second time in six months.
The region will expand 1.3 percent this year, rising to 2.2 percent in 2015, the Washington-based organization said in its quarterly report.
That’s just about half of the 2.5 percent the IMF predicted in April, and 0.7 percentage points lower thant July's forceast, as a languid Brazil and sluggish commodity exporters Peru and Chile, drag the region further away from rates of near 3 percent achieved in 2012 and 2013.
South America fared even worse, projected to grow just 0.7 percent in 2014, as recessions in Argentina and Venezuela take hold.
The fund predicted a “modest recovery” for 2015, but “risks remain tilted to the downside” as many economies lacked growth alternatives facing slumped raw material prices and supply bottlenecks.
Bolivia will be the region’s top performer, expanding 5.2 percent if estimates match expectations, closely followed by Colombia and Ecuador.
The region’s largest economy, Brazil, will expand just 0.3 percent, however, as weak competition and rising interest rates hit private investment. In 2015, it will see growth rise to 1.4 percent as political uncertainty surrounding this year’s elections subsides and activity regains momentum, the IMF expects.
Mexico was seen gathering momentum, set to hit 2.4 and 3.5 percent this year and next, after a slight expansion in 2013. A firmer U.S. recovery and an uptick in construction will complement “gradual dividends from the ongoing reform of the energy and telecommunication sectors.”
Growth in Chile and Peru in 2014 is expected to slow on reduced private investment, as softer Asia demand for raw materials lowered exports. Eased monetary and fiscal measures, helped by a weaker peso, would see Chile’s economy advance from 2 percent this year to 3.3 percent in 2015. Rising metal production in Peru would see growth expand 5.1 percent in 2015 on 3.6 percent this year.
Argentina and Venezuela will spend 2014 and 2015 trying to come out of recessions. A widening trade gap and instability over payments to debt holders forecast contractions of 1.7 percent in 2014 and 1.5 percent in 2015. Venezuela was the region’s worst performer, decreasing 3 percent this year and 1 percent in 2015, as 60 percent inflation and a dysfunctional policy mix in the Nicolas Maduro administration took hold.
Central America and the Caribbean will each average about 3.9 percent this year, helped by a firmer U.S. recovery.
FocusEconomics, a Barcelona-based economic forecaster, last month mirrored the IMF’s lowered predictions.
“September’s result represents a notable downward revision to the region’s economic outlook,” adding it was the 17th consecutive lowering of forecasts, in a report published Sept 16.
“The deterioration in Latin America’s economic outlook came within the context of rising uncertainty about the global economic recovery. After three consecutive months of downward revisions, the outlook for the global economy stabilized in September,” it added.
The global economy is expected to grow 3.8 percent in 2015, after a slowdown in the first half of this year, the IMF added.
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