The International Monetary Fund (IMF) projects steady economic growth for Latin America and the Caribbean, forecasting 2.4 percent for both this year and 2025. This outlook comes as the region navigates a shifting global landscape, according to the IMF's Regional Economic Outlook.
Despite global uncertainty, commodity prices have stabilized, financial conditions have eased, and regional exports have kept pace with global trends. Robust labor markets continue to support private consumption across most economies.
According to Rodrigo Valdés, Director of the Western Hemisphere Department, "Growth in Latin America and the Caribbean has experienced no major disruptions in the first half of this year."
Macro policy calibration remains a challenge, with structural primary balances lower than anticipated, indicating delays in fiscal consolidation. "With public debt ratios rising as we see in the region, fiscal consolidation is increasingly important to mitigate risks of the compression of risk premiums," Valdés noted. He added that insufficient fiscal effort complicates debt sustainability and the effectiveness of monetary policy.
Inflation remains above target in some countries, influenced by robust labor markets and fiscal concerns. Central banks in the region have responded appropriately, remaining data-driven. Valdés cautioned that continued vigilance is warranted, especially where economic slack is not evident and inflation remains above target.
The report highlights that the region's potential growth remains low, lagging behind emerging market peers due to slowing labor force expansion, low capital accumulation, and stagnant productivity. Analytical studies emphasize the need for fiscal consolidation, improved fiscal frameworks, and reforms to address resource misallocation and sluggish productivity growth among firms.
Regarding the Fund's engagement, Barbados completed its arrangement under the Extended Fund Facility and the Resilience and Sustainability Facility, while Costa Rica launched a new Flexible Credit Line (FCL), and Colombia cancelled its FCL.
Valdés, who will soon transition to the Fiscal Affairs Department, emphasized that "reinforcing policy frameworks, rebuilding fiscal buffers, and fostering growth opportunities are the sails that need to be adjusted."