Oct 2014 Financial News

IMF: Region’s growth slower than projected

Oct 09, 2014

WASHINGTON—The International Monetary Fund (IMF) says economic growth in Latin America and the Caribbean continued to slow in early 2014 even as it predicted that regional growth will pick up to 2.2 per cent in 2015, 0.7 percentage points weaker than previously projected.

The IMF in its Economic Outlook for 2014, noted that external conditions played a role, as exports fell short of expectations in early 2014, and terms of trade deteriorated for some countries.

But it said domestic factors were also important in several economies as supply bottlenecks and policy uncertainty held back business confidence and investment.

“The resulting slowdown has increasingly spread to consumer spending amid signs that labour markets, although still quite tight, are starting to soften.

“Overall, financial conditions are still supportive, with continued gains in equity prices and a narrowing of sovereign spreads since the beginning of the year, which have helped to reverse most of the financial market losses suffered after the mid-2013 turmoil.”

The IMF said domestic interest rates have also eased in most economies since April, but credit growth has continued to slow.

“Growth in the region is expected to average 1.3 per cent for 2014, the lowest rate since 2009 and 1.2 percentage points below the April 2014. The downward revision partly reflects weaker-than-expected growth outturns for the first half of the year and domestic demand growth that is now expected to be slower than previously projected.”

It predicted that “regional growth will pick up to 2.2 per cent in 2015, again 0.7 percentage points weaker than previously projected, supported by improving exports and a recovery in investment.

“In particular, supply-side reforms undertaken by some countries...should start to pay off as an initial wait-and-see attitude among businesses gives way to higher capital spending. “

The IMF said in the Caribbean, “long-standing competitiveness problems, high public debt, and significant financial fragilities will result in low growth in much of the region.

“Around this subdued outlook, risks remain tilted somewhat to the downside. Activity in the region’s commodity exporters might weaken with negative external demand shocks, such as a sharper-than-expected investment slowdown in China.”

Source:
Trinidad Guardian, A23
Thursday October 9, 2014