In a global economic outlook released this week, the International Monetary Fund (IMF) offered an updated forecast for national growth rates across the world, but the assessment maintained its prior projection for a GDP expansion of 2.5% in Colombia this year.
This keeps the Andean nation second among large Latin American economies, with only Peru, at 3.7%, outpacing Colombia’s expected growth in 2016. The IMF also maintained its 3.0% forecast for Colombia in 2017 along with longer-term estimates of 3.7%, 4.1%, and 4.3% for the country over the following three years.
In affirming its expectations, Alejandro Werner, director of the IMF’s Western Hemisphere department, praised the government’s monetary policy and infrastructure spending while touting the potential growth that the peace process could bring.
“In Colombia, a coordinated fiscal and monetary policy tightening will help contain the current account deficit and inflationary effects from weather-related and exchange rate shocks,” wrote Werner. “Recent advances in the peace process have increased prospects of a near-term final agreement, which would further boost market confidence and spur growth. The authorities’ infrastructure agenda is on track and should also help boost growth over the medium-term.”
While Colombia’s relatively lofty growth projections remain unchanged, the IMF offered a slight improvement to its regional forecast. The organization still expects a recession throughout Latin America and the Caribbean in 2016. But it now expects a 0.4% contraction compared to the 0.5% drop predicted in April, noting that ongoing turmoil in Brazil (where it projects a -3.3% rate), Argentina (-1.5%), and Venezuela (-10.0%) are the main problem areas holding back the region.
This uptick for Latin American growth stands in contrast to its global update, which fell from a 3.2% projection before the Brexit vote to 3.1% now — along with a downside potential of only 2.9%. Emerging markets similarly dropped from 4.2% in April to 4.1%.
In addition to the 2016 recessions in Brazil, Argentina, and Venezuela, both Uruguay and Ecuador are also struggling in South America. Werner noted that “growth has come to a virtual halt” in Uruguay, which “should focus on structural reforms,” and that Ecuador is still reeling from the devastating earthquake that hit in April in addition to low oil prices and a strong dollar.
Mexico, which like Colombia is expected to grow 2.5% this year, is experiencing better growth that its peers, while Chile is seeing slight growth (1.7%) even as low copper prices continue to drag on its long-term prospects.
In terms of large Latin American economies, Peru and Colombia are the only two countries currently projected for growth of 3.0% or more in 2017.