Snapshot: IMF's updated forecasts for LatAm

The IMF, in its latest World Economic Outlook, expects regional growth to come in this year at 1.2%, down from 1.3% in 2017.

Growth is expected to pick up in 2019 to 2.2%.

The multilateral's forecasts for 2018 and 2019 are down 0.8 and 0.6 percentage points, respectively, from those made in April.

Key factors behind the change in outlook are downward revisions to the forecasts for regional powerhouses Brazil and Mexico, which are now expected to see growth of 1.4% and 2.2% this year, down 0.9% and 0.1%, respectively, from April's forecast.

The World Bank has recently forecast 2018 growth in the region to come in at a more conservative 0.6%, citing the macroeconomic crisis that started in April in Argentina, the growth slowdown in Brazil, the continued deterioration of the economic and social situation in Venezuela, and an external environment that has recently taken a turn for the worse. The World Bank expects growth of 1.6% in 2019.

Echoing this, the IMF said a combination of factors have hit some countries in the region.

"Although global financial conditions remain generally supportive from a historical perspective, continued monetary policy normalization in the United States and a stronger US dollar, coinciding with country-specific factors, have put pressure on the exchange rates and funding costs of some emerging market economies (for example, Brazil, India, Indonesia, Mexico, South Africa, and especially Argentina and Turkey), and have led to further reductions in capital inflows," the IMF said.

The region's No. 3 economy, Argentina, is forecast to contract 2.6% this year, "a large downward revision relative to the April 2018 WEO forecast, reflecting recent financial market disruptions, high real interest rates, and the faster fiscal consolidation under the exceptional access Stand-By Arrangement approved in June." In its April forecast, the IMF said Argentina's economy would expand 2.0% this year. The IMF believes the economy will contract 1.6% next year and forecasts growth of 3.2% over the medium term "under the steady implementation of reforms and returning confidence."

The IMF recently increased the size of Argentina's standby credit line and the size of annual disbursements.

GLOBAL GROWTH, RISKS

The report forecasts that global growth will remain steady over 2018-19, at last year's rate of 3.7%.

Key risks include rising trade barriers and a reversal of capital flows to emerging market economies with weaker fundamentals and higher political risk - and these risks "have become more pronounced or have partially materialized."

SELECTED IMF COUNTRY GDP GROWTH FORECASTS FOR 2018

On a country level, growth forecast revisions vary. While the multilateral has cut its estimates for the likes of Brazil and Argentina, it has revised up its outlook for others.

Brazil

April 2018 forecast: 2.3%

Latest forecast: 1.4%

Mexico

April 2018 forecast: 2.3%

Latest forecast: 2.2%

Argentina

April 2018 forecast: 2.0%

Latest forecast: -2.6%

Venezuela

April 2018 forecast: -15%

Latest forecast: -18%

Colombia

April 2018 forecast: 2.7%

Latest forecast: 2.8%

Chile

April 2018 forecast: 3.4%

Latest forecast: 4.0%

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Peru

April 2018 forecast: 3.7%

Latest forecast: 4.1%

IMF SUB-REGION GDP FORECASTS

Central America

April 2018 forecast: 3.9%

Latest forecast: 2.8%

Caribbean

April 2018 forecast: 3.8%

Latest forecast: 4.4%