Along with an overall revision upward for global economic expectations this year, Latin America and the Caribbean is now projected to create greater economic growth in 2023 as a region compared to previous forecasts from the International Monetary Fund (IMF).
In its updated mid-year World Economic Outlook (WEO) released today, the IMF estimates the region’s gross domestic product (GDP) to grow by 1.9% in 2023, an increase of 0.3 percentage points from the 1.6% projection in the April edition of the report. The agency’s economists also expect regional GDP to grow by 2.2% in 2024, a figure that has not changed since the last report in April.
The authors noted that the improved regional forecast for 2023 is largely driven by positive news in Brazil and Mexico, which are now projected to grow by 2.1% and 2.6% in 2023, respectively.
“The upward revision for 2023 reflects stronger-than-expected growth in Brazil — marked up by 1.2 percentage points to 2.1 percent since the April WEO — given the surge in agricultural production in the first quarter of 2023, with positive spillovers to activity in services,” stated the report. “It also reflects stronger growth in Mexico, revised upward by 0.8 percentage point to 2.6 percent, with a delayed post-pandemic recovery in services taking hold and spillovers from resilient US demand.”
While Colombia was not included in the IMF’s mid-year reassessment, the organization in April projected the nation’s economy to grow by 1.0% in 2023 and 1.9% in 2024.
These figures represent a notable decline from the torrid 11.0% and 7.5% growth seen in the Andean country in 2021 and 2022, respectively, but those years reflected a major recovery from the COVID downturn while also exceeding the latest projections for both Argentina and Chile.
Today’s positive news is not exclusive to Latin America. The IMF now expects global growth to finish at 3.0% this year and 3.0% in 2024, and it credits a range of factors for the improved outlook, including a resolution of the US debt ceiling standoff, easing of the banking crisis that emerged in March, and an ongoing drop in inflation across the world.
The IMF also expects the United States to avoid the long-discussed possibility of falling into recession this year with a 2023 GDP growth projection of 1.8%. This will moderate to just 1.0% in 2024, however, highlighting the ongoing challenges facing all nations.
Despite the overall upward revision for global expectations, the IMF was quick to note that even the revised world growth figures are below the 2022 rate of 3.5% growth and still represent lackluster performance in a general sense.
“While the forecast for 2023 is modestly higher than predicted in the April 2023 World Economic Outlook, it remains weak by historical standards,” wrote the authors. “The rise in central bank policy rates to fight inflation continues to weigh on economic activity … [and] in most economies, the priority remains achieving sustained disinflation while ensuring financial stability.”
The IMF also listed a host of risks that remain for the global economy, any of which could lead to lower-than-expected growth this year and in the longer term.
“The balance of risks to global growth remains tilted to the downside,” stated the report. “Inflation could remain high and even rise if further shocks occur, including those from an intensification of the war in Ukraine and extreme weather-related events, triggering more restrictive monetary policy. Financial sector turbulence could resume as markets adjust to further policy tightening by central banks. China’s recovery could slow, in part as a result of unresolved real estate problems, with negative cross-border spillovers. Sovereign debt distress could spread to a wider group of economies.”