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Temporary factors weigh on LatAm economic growth: IMF

Economy Jul 29, 2019 09:41AM ET
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© Reuters. Temporary factors weigh on LatAm economic growth: IMF

By Rodrigo Campos

NEW YORK (Reuters) - A sharp decline in International Monetary Fund estimates for Latin American economic growth in 2019 largely resulted from "temporary factors" including adverse weather, while policy uncertainty in the largest economies also weighed.

Alejandro Werner, director of the IMF's Western Hemisphere department, wrote on Monday that output suffered as weather reduced mining output in Chile and agricultural output in Paraguay, while mining activity in Brazil slowed after a dam disaster.

An under-execution of the budget, labor strikes, and

fuel shortages dragged Mexico's economic growth lower, Werner wrote.

Last week, the IMF slashed its 2019 economic growth expectation for Latin America by more than half to 0.6%, from its 1.4% increase estimate just three months earlier.

(GRAPHIC-IMF cuts 2019 LatAm growth expectation: https://tmsnrt.rs/32Uc3om)

Brazil, now expected to grow only 0.8% from 2.1% three months ago, is seen accelerating to 2.4% in 2020, "assuming a robust pension reform is approved, confidence returns, investment recovers, and monetary policy remains accommodative," according to Werner.

Mexico, seen now growing 0.9% this year from 1.6% percent in the previous estimate, is expected to accelerate to 1.9% in 2020 "as conditions normalize."

The IMF said it is key for Mexico to stick to its fiscal deficit target in 2019 and pass a "prudent" budget for next year.

Argentina's 2019 economic contraction is seen slightly deeper at -1.3% from -1.2%, but the sharper cut came in the 2020 estimate, which fell to 1.1% from 2.2%.

"With inflation proving to be more persistent, real interest rates will need to remain higher for longer, resulting in a downward revision to GDP growth in 2020," Werner wrote about Argentina.

The IMF said last week that as a region it expected Latin America to grow 2.3% in 2020, compared with the 2.4% estimated in April.

Temporary factors weigh on LatAm economic growth: IMF
 

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