IMF Warns Surging Virus Threatens to Curb Latin America Rebound

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Latin America’s economic recovery faces risks from failure to stop the spread of the coronavirus and the need for new lockdown measures, according to the International Monetary Fund.

The region’s full recuperation is a long way off, IMF officials including Western Hemisphere Director Alejandro Werner wrote in a blog post published Monday. Output won’t return to pre-pandemic levels until 2023, and gross domestic product per capita until 2025, Werner said.

IMF Warns Surging Virus Threatens to Curb Latin America Rebound

Nations need to be careful to avoid removing fiscal support too soon, a move which could jeopardize sufficient resources for health care systems and aid for vulnerable sectors, Werner said. Countries with budget room should continue to provide funding and make it more targeted, he said.

Large economies in the region may have underestimated their space for stimulus, given that low borrowing costs are helping contain interest expenses at low levels even as debt to GDP increases, Werner said. Central banks in countries with well-anchored inflation should continue expansionary monetary policy, he said.

Among forecast changes announced on Monday, Colombia’s 2021 growth projection was increased to 4.6% from 4%, Chile upgraded to 5.8% from 4.5% and Peru raised to 9% from 7.3%.

Increases in the forecasts for Brazil to 3.6% from 2.8%, Mexico to 4.3% from 3.5% and Latin America overall to 4.1% from 3.6% were announced in last month’s update of the World Economic Outlook. Argentina saw its projection cut last month to 4.5% from 4.9%.

The outlook has worsened for Caribbean countries where a vital return of travel and tourism has been much slower than expected. Those nations are forecast to grow just 2.4% this year after shrinking 9.8% in 2020.

©2021 Bloomberg L.P.

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