IMF says LatAm not seriously hit by US downturn

11 April 2008 19:29  [Source: ICIS news]

WASHINGTON (ICIS news)--Latin American nations have not been as seriously affected by US economic woes as in earlier downturns, but growth in the region will slow this year and next, the International Monetary Fund (IMF) said on Friday.

 

In its latest regional economic outlook for Latin America and the Caribbean (LAC), the 185-nation global financial stability group said that “economies in the Latin American and Caribbean region have generally held up well so far in the face of recent global financial strains.”

 

Stresses in US financial markets triggered by the year-old sub-prime mortgage market collapse “have had less impact on Latin America’s financial markets and external funding than in past episodes of global financial disruptions,” according to IMF Western Hemisphere director, Anoop Singh.

 

The economic health of Latin America and the Caribbean is important to US chemical producers and other manufacturers that have come to depend increasingly on foreign markets as the domestic US downturn has deepened.

 

Singh said that while external funding conditions have tightened for Latin American nations, “the prospects for a number of countries in the region have been strongly supported by still-strong commodity prices.”

 

Even so, “growth in the LAC region is expected to slow this year and next given the weaker external conditions,” Singh said.

 

“In the baseline scenario, the regions growth is projected to slow gradually from 5.6% in 2007 to 4.4% in 2008 and 3.6% in 2009,” he said. “This reflects the impact of weaker external demand and financial conditions as well as moderating commodity prices and remittances,” he added.

 

While the Latin American region may be less susceptible to catching North America’s economic “cold” than in earlier decades, Singh said the region will not escape some related weakening.

 

“The financial shocks currently playing out in the global economy introduce a particularly high degree of uncertainty for the region,” he said. “Moreover, the possibility that commodity prices could unwind, as in previous global slowdowns, remains an important downside risk for the commodity-exporting countries in the region.”

 

The IMF was established at the end of World War II to promote monetary stability, economic growth and employment. It provides temporary funding to countries to ease balance of payments adjustments.

By: Joe Kamalick
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