Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

World Bank Cuts Its Latin America Growth Cal

Published 04/04/2019, 04:31 PM
Updated 04/04/2019, 05:10 PM
© Bloomberg. A mural of Nicolas Maduro, Venezuela's president, is seen on the wall of a building in the Jose Felix Ribas neighborhood of the Petare slum in Caracas.

© Bloomberg. A mural of Nicolas Maduro, Venezuela's president, is seen on the wall of a building in the Jose Felix Ribas neighborhood of the Petare slum in Caracas.

(Bloomberg) -- The World Bank roughly halved its 2019 economic growth forecast for Latin America on a tougher global environment and Venezuela’s downward spiral.

Latin America and the Caribbean will expand 0.9 percent this year, down from the bank’s October forecast for 1.6 percent growth. The estimates include a 25 percent GDP plunge in Venezuela that’s triple the multilateral’s prior outlook, and a lower forecast for Mexico that reflects policy uncertainty.

“Prospects for this year show no real improvement over 2018, as a result of weak or negative growth in the three largest economies in the region – Brazil, Mexico, and Argentina – and a total collapse in Venezuela,” according to the report, entitled ‘When Dreams Meet Reality.’ “The sharp drop in commodity prices – especially oil and copper – during the last months of 2018 and the deceleration of Chinese growth may turn into significant headwinds.”

Latin America has struggled to return to the levels of expansion seen during the boom years of soaring commodity prices. While signs that the U.S. Federal Reserve won’t raise its key rate again until 2020 will provide "a breather" to the region, a trend toward higher borrowing costs globally may prompt regional governments to keep monetary policy tight at the expense of growth, according to the report.

In Mexico, the region’s second-largest economy, President Andres Manuel Lopez Obrador has sent mixed signals about policy making. For example, he rattled financial markets by putting energy reforms on hold, but subsequently submitted a “relatively prudent” fiscal 2019 budget.

“Only time will tell which orientation will prevail,” the report said. “In the meantime, economic policy uncertainty is likely to force the central bank to maintain a tight monetary policy, which will hurt growth.”

Meantime, Venezuela’s economic catastrophe will see inflation reach 10 million percent in 2019, while the number of migrants who have fled the country surpasses 5 million, according to the report. Likewise, the World Bank cited unofficial sources indicating poverty reached 90 percent of the country’s population.

The multilateral is preparing “extremely ambitious” humanitarian aid for Venezuela which it will make available when conditions are appropriate, Carlos Vegh, the World Bank’s Chief Economist for Latin America, told reporters on a conference call.

(Updates with comment from World Bank’s chief economist in final graph.)

© Bloomberg. A mural of Nicolas Maduro, Venezuela's president, is seen on the wall of a building in the Jose Felix Ribas neighborhood of the Petare slum in Caracas.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.