IMF Revises Latin America 2022 Forecast Upward, But Sees Slower Growth in 2023

The new forecast estimates 3.5% growth for this year, but with a slowdown toward year’s end and in 2023, while “the worst is still to come” at a global level

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October 11, 2022 | 10:25 AM

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Bloomberg Línea — The International Monetary Fund (IMF) has once again improved its growth forecast for Latin American and Caribbean economies in 2022, with growth estimated at 3.5% this year, 0.5% above its July forecast and 1% above its April outlook, according to the most recent World Economic Outlook (WEO).

However, the outlook for 2023 is less rosy, with the IMF expecting the region’s economy to grow by just 1.7%, down 0.8% and 0.3% from the April and July revisions respectively.

Like other projections, such as those by the World Bank and the Institute of International Finance (IIF), which both projected 3% growth for the region in 2022 in their October revisions, the IMF also argues that rising commodity prices and the normalization of activities have boosted economic activity in the region.


“However, growth in the region is expected to slow in late 2022 and 2023 as growth in partner countries weakens, financial conditions tighten and commodity prices soften,” the IMF said.

With respect to inflation, the IMF predicts it could reach 14.1% at the end of the year for Latin America and the Caribbean, decreasing to 11.4% in 2023 and 5.7% in 2024.

Regarding the two largest economies in the region, Brazil and Mexico, the IMF said those two economies will grow by 2.8% and 2.1% respectively this year, but will underperform in 2023, with growth of 1% and 1.2%, it estimates.

New forecasts for the global economy

The WEO, published on Tuesday, points out that the negative revisions are now “more pronounced for advanced economies” than for emerging and developing ones.


Under this assumption, the IMF said its global growth estimate for this year remains at 3.2%, the same as the July projection, while that for 2023 is down to 2.7%, two percentage points lower than the previous revision.

“The 2023 slowdown will be widespread, with countries accounting for about a third of the world economy contracting this year or next,” is the agency’s indication, noting that the United States, China and the Eurozone will remain stagnant.

According to the document, a global recession “does not currently figure in the baseline forecast,” although a technical recession, which is configured with two consecutive quarters of contraction, could occur “sometime in 2022-2023 in about 43% of economies with quarterly data forecasts (31 out of 72 economies),” accounting for more than one-third of global GDP.

On inflation, the IMF outlook says that globally it will peak at 9.5% this year and decelerate to 4.1% in 2024, considering that inflationary pressures are becoming broader and more persistent than expected.

“Rising price pressures remain the most immediate threat to current and future prosperity, reducing real incomes and undermining macroeconomic conditions,” the IMF said.

A bleak outlook

Globally, the IMF sees a one-in-four chance that economic growth next year will fall below the historically low level of 2%, noting that, “if many of the risks materialize,” the figure could fall to 1% with per capita income near stagnation by 2023.


The probability of such an adverse outcome, or worse, “is 10% to 15%,” according to the IMF’s calculations.

Alongside these factors, the WEO notes that the risk of a monetary, fiscal or financial policy misalignment has increased, as global financial conditions could deteriorate and the dollar could strengthen further, pushing investors into safe-haven assets.

Likewise, inflation could become more persistent if labor markets remain extremely tight. In addition, a further escalation in Russia’s war in Ukraine could aggravate the energy crisis.