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Latin America poised for robust 4.1% growth - IMF

Published:Thursday | April 22, 2010 | 12:00 AM

Latin America is poised for 4.1 per cent growth in the coming year, making it among the most robust regional economies to emerge from the global recession, the IMF said in a report released Wednesday.

The International Monetary Fund's latest World Economic Outlook said the region on the whole appears to have "weathered the global downturn comparatively well", and is "posting a strong recovery".

Furthermore, the IMF found that growth in Latin America and the Caribbean (LAC) is "more balanced than in most other areas", and that "output growth in the region is supported by both external and domestic demand".

The recovery is projected to be especially strong in many of the commodity-exporting, financially integrated economies accounting for about two-thirds of the LAC region's gross domestic product (GDP).

The IMF said economic recovery in Latin America has been shaped by "accommodative policies" and "good fundamentals" like sound financial systems and solid balance sheets, helping it bring back investment capital.

Meanwhile, higher commodity prices and increased external demand also are fuelling the region's growth, the IMF said.

The region's top economic performer, Peru, is projected to expand by 6.25 per cent in 2010, thanks to "favourable internal dynamics" and high commodity prices.

Brazil, the second-fastest growing economy, is expected to post 5.5 per cent growth, led by strong private consumption and investment.

Projected growth

Chile, which was hit this year by a devastating earthquake, is projected to grow at about 4.75 per cent rate in 2010 and six per cent in 2011, in part thanks to its rebuilding efforts.

Mexico, which posted a 6.5 per cent decline in 2009, is expected to surge to a solid 4.2 per cent rate of growth in 2010.

The Caribbean will grow just 1.5 per cent, however, because of a decline in tourism and a drop in overseas remittances.

Among the commodity-importing countries expecting less-than-robust growth are several that have large tourism sectors, like Antigua and Barbuda, the Bahamas, Barbados, and St Lucia.

"For most tourism-intensive economies, the key challenge is to manage the recovery and maintain macroeconomic stability with limited policy choices, given high levels of public debt," the IMF report said.

The rebound is projected to be relatively strong in Bolivia and Paraguay, but the worst results were expected in Venezuela, which is expected to show a 2.6 per cent decline in GDP, in large part because of its ongoing power shortages.

Officials said the region's solid economic performance is in stark contrast to earlier downturns — especially one in the 1980s that accompanied a raging debt crisis.

The 1980s downturn, which often has been referred to as Latin America's "lost decade", was marked by large amounts of public spending, heavy external borrowing, and inconsistent monetary and fiscal policies.

Latin America's projected 4.1 per cent growth rate for 2010 compares to forecasts of 3.1 per cent for the United States, 1.0 per cent for the European Union and 1.9 per cent for Japan.

- Agence France-Presse