Jan 2017 Financial News

IMF reduces its regional growth forecast

Jan 24, 2017

The International Monetary Fund (IMF) has revised downwards its economic growth projection for Latin America and the Caribbean.

In its World Economic Outlook Update released today, the IMF said it was now projecting 1.2 per cent growth for the region for 2017, which is 0.4 per cent less than the 1.6 per cent it had estimated in October last year.

This follows a contraction of 0.7 per cent which occurred in the region last year.

However, the IMF is predicting that regional economies will growth by 2.1 per cent next year.

“Growth in tourism-dependent economies will be supported by the expected higher growth in the United States while commodity exporters will benefit from somewhat higher, though still slow, commodity prices, notably of oil,” the IMF said.

However, it warned that the region continued to face several risks, including the withdrawal of correspondent banking relationships and a high degree of policy uncertainty in the US.

“Amid increasingly volatile external conditions, exchange rate flexibility has served the region well and should remain the first line of defence against shocks. Well-established monetary policy framework in the region are suited to limit the exchange rate pass-through to consumer prices,” it explained.

“Strong risk management practices and policies facilitating corporate balance sheet repair are also critical to reduce vulnerabilities arising from tightening of global financial conditions and sharp currency movement,” it added.

The IMF also warned that countries should “continue to use available space to calibrate fiscal adjustment, as commodity prices are expected to remain relatively low.

“The needed pace of adjustment will depend on debt levels and market pressures. Beyond macroeconomic policy adjustment, structural reforms – such as decreasing informality and red tape, boosting infrastructure quality, and improving education and rule of law – are essential to support medium-term growth,” it said while projecting an improved outlook for the US and other advanced economies, including China.

Source:
Marlon Madden
Barbados Today
Tuesday January 24, 2017

https://www.barbadostoday.bb/2017/01/24/imf-reduces-its-regional-growth-forecast/