Latin American, Caribbean economic rebound swift but uneven…IMF

Post-crisis economic recovery in Latin America and the Caribbean is likely to occur at a faster rate in commodity exporting countries, according to the International Monetary Fund’s most recent Regional Economic Outlook – Western Hemisphere – released earlier this week. “The recovery in Latin America and the Caribbean (LAC) is advancing faster than anticipated but at different speeds across countries,” an IMF press release summarizing the contents of the report said.

The Report which says that regional GDP is expected to grow by around 4 per cent in 2010 following a contraction of around 1.8 per cent in 2009, says that the current upward growth trend in the region is driven primarily by a strong rebound in private consumption and improved extra-regional conditions.

And while Director of the Fund’s Western Hemisphere Department Nicolas Eyzaguirre is confidently predicting “a good performance for LAC economies in 2010,” he cautions that within that regional picture “countries with strong ties to global financial markets are likely to stage a more vigorous recovery, helped by their access to ample external financing and by strong prices for their commodity exports. On the other hand some of the smaller economies will experience more sluggish growth and some of those will even contract,” Ezaguirre said. He added that policy approaches in the various economies in the region will have to vary considerably to ensure sustainable recovery across countries.

For the purpose of analyzing the regional outlook the IMF Report divides Latin American and Caribbean countries into four groups ranging  from “countries that are exporters of commodities and have full access to global financial markets,” including Chile, Colombia, Mexico and Peru to “other commodity-importing countries” including Guyana and several Central American countries. The report says that the first group of countries will face challenges associated with managing the current upswing in the business cycle. “As economic activity recovers and inflation and output gaps close, there will be a need to phase out macroeconomic policy stimulus starting with the fiscal side, especially where private demand is gaining strong momentum,” the IMF release says. On the other hand the release says that for many commodity-importing countries in Latin America and the Caribbean where the room for macro-economic stimulus has been almost depleted, “the remaining space should be prudently saved and replenished if possible to address potential downslide risk scenarios.

The report adds that those Latin American and Caribbean countries whose tourism sectors have been hurt by weak employment conditions should now focus on easing hardships on the poor and maintaining macro-economic stability.

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