The economies of Latin America and the Caribbean will grow slightly this year but will continue to face high inflation, according to the new Global Economic Outlook report from the International Monetary Fund (IMF), published last Tuesday. The report estimates that the region will grow by 1.6% in 2023, 2 tenths below what was previously calculated, and very far from the 4% growth that it registered in 2022.
And it is that many Latin American countries are exporters of raw materials, something that played in their favor last year, thanks to the increase in food or fuel prices brought by the Russian invasion of Ukraine, but that will hamper their growth this year. “2022 was the year that commodity prices started to rise, and then they started to fall, and it is expected that in 2023 they will fall even further”, IMF research director Pierre-Olivier Gourinchas told reporters.
Some momentum
This situation, coupled with aggressive interest rate hikes by many central banks to curb inflation, has taken “some momentum” out of the region, as governments begin to undo some of the fiscal aid programs adopted during the pandemic. All in all, Latin America has shown itself to be “very resilient” to the challenges of recent years, said the Fund’s deputy director of research, PetyaKoeva-Brooks. In the case of employment, “we already see levels above those before the pandemic”, she said. However, inflationary pressures will remain high in many countries, especially in Argentina, where the agency projects inflation of more than 98% for 2023, or in Venezuela, where it is expected to reach 400%.
The main economies of the region will have very moderate growth throughout 2023, in line with the world economic outlook. This is the case of Mexico, which will grow by 1.8% in 2023, after having registered an increase in its gross domestic product (GDP) of 3.1% in 2022. The figure will moderate even more in 2024, until 1 .6%, while inflation will go from 6.3% this year to 3.9% next year.
Each case apart
Chile, for its part, is the only Latin American country that will enter a recession, according to IMF figures, which projects a loss of one percentage point of GDP this year. The country will recover in 2024 and will grow by 1.9%, according to projections. By then, inflation will stand at 4%, after falling to 7.9% this year. Colombia will experience very moderate growth of 1% in 2023 and 1.9% in 2024. Inflation will grow this year, to 10.9%, but will moderate to 5.2% next year.
Finally, Brazil, one of the first countries to start raising interest rates to stop the inflationary spiral, will see its GDP grow by just 0.9% this year, while inflation will drop to 5%. By 2024, the country will grow 1.5% and keep inflation at 4.8%, according to the agency’s projections. The countries of Central America will gain a little more momentum, where the IMF forecasts growth of 3.8% in both 2023 and 2024, while inflation is gradually reduced to 5.5% this year, and up to 4% next year.
The region that will grow the most will be the Caribbean, whose GDP will rise by 9.9% this year, although with inflation of 13.5%, and will return strongly in 2024, where it will register a 14.1% increase, already with the more moderate inflation around 6.8%.
