IMF forecasts sharp fall in Latin America’s GDP

In its latest World Economic Outlook (WEO) report released on Tuesday (13 October), the International Monetary Fund (IMF) projected an 8.1 per cent decrease in GDP for Latin America and the Caribbean in 2020.

Among the region’s largest countries, the fund forecast an 11.8 per cent drop in Argentina’s GDP in 2020, a 9.0 per cent fall for Mexico, and a 5.8 per cent contraction in Brazil.

In a statement, the IMF said that small countries and those dependent on the export of raw materials and tourism were in an ‘especially difficult’ position. Furthermore, the IMF said that Caribbean countries and the aviation sector faced a particularly challenging economic panorama.

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Why it matters: The IMF’s latest forecast for Latin America and the Caribbean is slightly less severe than its June forecast, which predicted a 9.2 per cent fall in GDP. The slight improvement in the forecast has been driven by the better-than-expected economic performance of large economies, particularly China and the US.

The forecast GDP fall of 8.1 per cent for Latin America and the Caribbean, however, remains the deepest among major world regions, exceeding Emerging and Developing Europe (-4.6 per cent), Middle East and Central Asia (-4.1 per cent), and Sub-Saharan Africa (-3.0 per cent).

This is likely because the region has been particularly badly affected by the coronavirus (COVID-19) pandemic, with many countries reporting among the highest numbers of cases and fatalities worldwide.

The sharp economic contraction, which is very likely to be accompanied by rising unemployment and growing poverty, increases the risk of short-to-medium term political instability and potentially civil unrest in the worst affected countries. Organisations with interests in the region should assess how the economic outlook will impact operations, finances, and planned investments.