The International Monetary Fund has surprisingly raised its growth forecasts for Latin America this year. Brazil and Mexico, however, disappoint. From 2022 onwards, growth in the entire region will fall back somewhat.
by Alexander Busch, Latin America correspondent for Handelsblatt and Neue Zürcher Zeitung
The growth outlook for Latin America has improved significantly, according to the International Monetary Fund (IMF) in its latest World Economic Outlook. Compared to April, the Fund has raised its forecasts for Latin America by the most in the world. At 6.3% growth this year, Latin America will grow about as fast as the average for emerging markets worldwide. This is mainly due to high commodity prices and vaccination campaigns in the countries, which are now quite advanced. In Brazil, where the federal government delayed the vaccination campaign for a long time, more people have now been vaccinated against Corona at least once than in Germany.
Chile (11%), Peru (10%), Colombia (7.6%) and Argentina (7.5%) will lead the recovery among the larger economies in the region this year. However, the forecasts for Brazil are disappointing: This year, Latin America’s largest economy will still grow 5.2%; for 2022, the IMF expects growth of only a meager 1.5%. Mexico’s economy will also grow at a below-average rate of 6.2% this year and 4% in 2022.
Overall, the outlook for Latin America as a whole for the coming year is gloomy: At 3% for Latin America as a whole, the region brings up the rear among the world regions on the scale of growth forecasts. Colombia (3.8%), Peru (4.6%) and Mexico (4%) will grow at an above-average rate, according to IMF forecasts.
The biggest risks that the IMF sees for growth in the next few years apply particularly to Latin America: On the one hand, there is the risk of new Corona variations, which could make new lockdowns necessary. The gaps between supply and demand for many goods and service providers – from food and gas to truck drivers and semiconductors – could also lead to a decline in growth. Rising inflation – which at 9.3% in Latin America this year is well above the emerging-market average (5.5%) – is weighing on the economy. Last but not least, social tensions and elections (in Argentina, Chile, Colombia, Brazil in the next twelve months) could have a dampening effect on the economies.
COVID-19 in Latin America
Development of case numbers in the region
Currently reported cases in the countries
COVID-19 vaccine doses administered
Share of people vaccinated by country