IMF tweaks projected economic growth in Latin America

The IMF reviewed its projections for economic growth in Latin America in 2024 and 2025.

The multilateral now projects an expansion of 2.1% in Latin America and the Caribbean this year and growth of 2.5% in 2025, according to its World Economic Outlook report. In its July report, the IMF had forecast 1.8% for 2024 and 2.7% for 2025.

In 2022, the LAC region grew 2.2%.  

"The more optimistic forecast for the economy this year is largely based on the performance of Brazil, which is the largest economy in the region and is growing faster than expected, a fact that will not be repeated next year because there is little fiscal room for the government to continue sustaining the strong expansion through public spending," Luciano Rostagno, chief strategist at EPS Investimentos, told BNamericas.

According to the IMF, Brazil’s GDP is expected to expand 3% this year and 2.2% in 2025. The forecast for this year is up from 2.1% previously, while for next year the estimate was 2.4%.

"This is an upward revision of 0.9 percentage point for 2024, compared with July 2024 World Economic Outlook Update projections, owing to stronger private consumption and investment in the first half of the year from a tight labor market, government transfers, and smaller-than-anticipated disruptions from [Rio Grande do Sul state] floods," said the IMF. "However, with the still-restrictive monetary policy and the expected cooling of the labor market, growth is expected to moderate in 2025." 

Meanwhile, the IMF sees Argentina’s economy contracting 3.5% this year and expanding 5% in 2025.

"Argentina is facing two factors, the first is a severe fiscal restriction rarely seen of this size and intensity in other countries, which is being implemented by President Javier Milei, and this will impact the economy this year," Roberto Troster, an Argentine economist and former chief economist at Brazilian banking federation Febraban, told BNamericas. "However, there are signs of economic recovery and increased business confidence paving the way for expansion next year. So, in 2025 in Argentina, the scenario points to strong economic growth."

According to Rostagno, the better forecast for Latin America's economy next year is also due to the reduction in interest rates in various countries in the region recently, except Brazil, which is in a monetary tightening cycle. 

MEXICO 

Mexico, the second largest country in the region, is likely to see economic growth of 1.5% and 1.3% in 2024 and 2025, respectively, compared with projections of 2.2% and 1.6% previously, according to the IMF.

"In Mexico, growth is projected at 1.5 percent in 2024, reflecting weakening domestic demand on the back of monetary policy tightening, before slowing further to 1.3 percent in 2025 on a tighter fiscal stance," said the IMF.

Chile is expected to expand 2.5% this year and 2.4% in 2025; Colombia 1.6% this year and 2.5% in 2025; and Peru 3% this year and 2.6% in 2025, according to the report.