IMF: These factors are slowing down Latin America's COVID-19 recovery
来源:World Economic Forum;发表于:2022-05-09;人气指数:265
IMF:
These factors are slowing down Latin America's COVID-19 recovery
https://www.weforum.org/agenda/2022/02/latin-america-recovery-losing-momentum/
A slowdown is
inevitable as economies return to their pre-pandemic GDP levels.
Image: REUTERS/Ricardo
Moraes/File Photo
09 Feb 2022
Ilan Goldfajn
Director of the
International Monetary Fund, in charge of the Western Hemisphere Department
Anna Ivanova
Jorge Roldos
Assistant Director in
the Western Hemisphere Department, International Monetary Fund
*For Latin America
and the Caribbean, the economic recovery is expected to slow, after bouncing
back from 2020 lows.
*A rise in inflation
has also damaged economic growth, related to the surge in food and energy
prices, write three IMF economists.
*Core prices grew
rapidly in Brazil (7.2 percent), Chile (6.4 percent) and Mexico (5.9 percent),
suggesting that inflation threatens to become more broad-based
Economies in Latin
American and the Caribbean are losing steam after making a strong comeback last
year.
After a dramatic
economic collapse in 2020, growth in the region rebounded to an estimated 6.8
percent, driven by robust trading partners growth, higher commodity prices, and
favorable external financing conditions. On the domestic front, progress on
vaccinations, continued fiscal support in some countries (e.g. Chile and
Colombia) and accumulated savings from 2020 also supported growth.
For 2022, we expect growth
to slow to 2.4 percent, a downgrade from our October forecast of 3
percent.
A slowdown is
inevitable as economies return to their pre-pandemic GDP levels. But the
downgrade reflects other challenges, including slower growth in China and the
United States, continued supply disruptions, tighter monetary and financing
conditions, and the emergence of the Omicron variant.
Surging prices
Last year was marked
by rising inflation. In some of the largest economies in the region
(Brazil, Chile, Colombia, Mexico and Peru), prices increased by 8.3 percent in
2021—the largest jump in 15 years and higher than in other emerging markets.
This rapid increase
partly reflected the surge in food and energy prices. Core inflation, excluding
food and energy prices, rose by less (6.3 percent), but still exceeded
pre-pandemic trends and outpaced core price inflation in other emerging markets
(5.3 percent on average).
Core prices grew
rapidly in Brazil (7.2 percent), Chile (6.4 percent) and Mexico (5.9 percent),
suggesting that inflation threatens to become more broad-based, though there is
substantial variation across economies.
Rising commodity and
imports prices both can account for rising inflation.
Image: IMF
Many factors have
contributed to the rise in inflation: rising commodity and imports prices (in
part, due to global supply disruptions), exchange rate depreciations, as well
as released pent-up consumer demand and a shift in spending towards goods over
services. In some countries, wage pressures and indexation practices (contracts
that adjust their terms automatically with inflation) are pushing up prices
further.
Responding decisively
Given the region’s
history of high inflation, large central banks reacted quickly and decisively
to the sharp rise in consumer prices.
The speed of monetary
policy tightening has differed across countries depending on their position in
the economic cycle, and the degree and scope of price pressures and central
bank credibility. In Brazil, Chile, Colombia, Mexico and Peru, policy rates
rose between 1.25 percentage points and 7.25 percentage points over the course
of 2021. These were often combined with forward guidance that signaled further
rate increases in the coming months.
The hike in policy
rates have helped maintain anchored inflation expectations, as we noted in
our October Regional Economic Outlook , while shoring up the hard-won
credibility of central banks.
The speed of monetary
policy tightening has differed across countries depending on their position in
the economic cycle
Image: IMF
Long-term inflation
expectations remain relatively well-anchored, which reflects trust in monetary
policy to bring inflation back to targets. However, short-term inflation
expectations are elevated, suggesting the need for continued vigilance and
possible further action by central banks in some countries.
If rising inflation
threatens to de-anchor inflation expectations, central banks will have to raise
interest rates further to signal a continued commitment to inflation targets
and to avoid persistent price increases. This would have to be accompanied by clear
and transparent communication.
Long-term inflation
expectations remain relatively well-anchored,
Image: IMF
Lingering uncertainty
Uncertainty about the
evolution of the pandemic more broadly continues to cast a shadow on the
recovery globally and in Latin America and the Caribbean.
Inflationary
pressures in the United States and across the region, which may call for an
even faster withdrawal of monetary accommodation, the potential change in
investor risk sentiment and associated tighter global and domestic financial
conditions also represent major risks to the recovery. Policymakers could
prepare for US monetary policy tightening by extending public debt maturities,
reducing fiscal rollover needs more generally, and limiting the buildup of
currency mismatches on financial sector balance sheets where possible.
Major challenges
ahead
The pandemic hit
after a year of widespread social unrest in the region, which had built up
during years of economic stagnation following the end of the commodity boom.
With a heavy election calendar looming, social unrest remains a major risk and
inequality will need to be addressed.
Countries in the
region must simultaneously tackle three major challenges: ensuring the
sustainability of public finances; raising potential growth; and doing it in a
manner that promotes social cohesion and addresses social inequities.
Addressing these
challenges, which started even before the pandemic, will take time.
Policymakers should start now to develop a comprehensive strategy for
addressing them and building societal consensus around this strategy.
Countries in Latin America
and the Caribbean region have a unique opportunity to reinvigorate growth
engines and to build forward toward a more prosperous, sustainable, and
inclusive region.
latest projections
for Latin America and the Caribbean
Image: IMF