THE International Monetary Fund has raised its 2022 growth projection for Latin America and the Caribbean due mainly to recovery in the large economies (Brazil, Mexico, Colombia, Chile).

In its July 22 update the fund also notes that rising borrowing costs, combined with high inflation and slowing growth, have prompted comparisons to the 1970s and early 1980s in the region and globally.

The new report stated, “In the 1970s, surpluses from oil exporters — which had gained from higher energy prices — boosted funding for emerging market economy debt markets. Central banks tightened policies in the early 1980s to fight high inflation which led to disorderly external adjustment and debt defaults in some cases, notably in Latin America. Could similar shocks today lead to similar imbalances?”

In its World Economic Outlook report, the IMF forecasts the Caribbean and Latin American economy could expand by 3 per cent this year, compared with the 2.5 per cent forecast it had issued in April.

The upward revision is due to the expected performance of large economies such as Brazil, Mexico, Colombia and Chile. However, for 2023 the IMF lowered its growth projection to 2 per cent, from 3 per cent previously.

“For this year the IMF estimates are now more in line with what economists were already expecting for the region’s economy. However, the concern now lies with the regional performance in 2023, as a stronger downturn is expected in the US and European countries and this could have important effects in the region,” Alex Agostini, chief economist at Brazilian ratings agency Austin Rating, was quoted as saying in a BNamericas report.

The IMF sees the Brazilian economy expanding 1.7 per cent and 1.1 per cent in 2022 and 2023, respectively, compared to the prior forecasts of 0.8 per cent and 1.4 per cent .

For the region’s second-largest economy, Mexico, the predictions are now 2.4 per cent and 1.2 per cent in the same comparison, versus 2 per cent and 2.5 per cent in April. Individual forecasts for Colombia and Chile were not provided.

Citing the effects of inflationary pressures and interest rate hikes, the IMF lowered its GDP estimates for the global economy to 3.2 per cent this year and 2.9 per cent in 2023, versus the previous prediction of 3.6 per cent for both years.

The IMF noted that for emerging market and developing economies, inflation in 2022 is expected to reach 10.0 per cent on a fourth-quarter-over-fourth-quarter basis. Revisions for those economies display greater variation across countries, with relatively modest 2022 increases in emerging and developing Asia (partly because of a slowdown of activity in China and limited increases in prices of staple foods) but larger revisions for Latin America and the Caribbean (up by 3.0 percentage points) and for emerging and developing Europe (up by 2.9 percentage points).