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IMF sees Latin American growth cooling
AFP
WASHINGTON
Petroleumworld.com 04 12 07
Latin America's economic growth is likely to cool overall in 2007 with the exception of heavyweights Brazil and Chile, which will see a modest pickup, the International Monetary Fund said Wednesday.
The IMF's semiannual outlook report said Latin America would likely be buffeted by slowing global growth and lower crude oil and metals prices, and that countries with strong trade ties to the United States could expect weaker growth.
The fund expects gross domestic product (GDP) growth for the region to slow to 4.9 percent in 2007 from 5.5 percent in 2006."This slowdown is expected to be relatively broad-based, Brazil and Chile are the exceptions," the IMF said.
The Fund said countries with robust trade links to the United States and significant exporters of oil and metals, such as Ecuador, Peru and Venezuela, would be most affected by moderating growth.
However, the IMF said falling oil prices would likely bolster regional economies that are not major commodity exporters, including central American and Caribbean states.
Brazil's growth is anticipated to increase to 4.4 percent from 3.7 percent while Chile's growth is seen rising to 5.2 percent from 4.0 percent.
The IMF's economic forecasters said growth in Brazil, Latin America's largest economy, is likely to be boosted by lower interest rates and the potential for rates to fall further as inflation is "well contained."
Chile's central bank also recently cut interest rates and the country's exports are likely to rise following supply disruptions to its mining industry.
Despite the projected slowdown, the IMF underlined that the region witnessed its strongest period of three-year growth between 2004 and 2006 since the late 1970s, when many states were ruled by military dictatorships.
The Fund also issued a call for greater economic equality and urged goverments to build on reforms already implemented.
" Improving the distribution of income is not only essential from a social perspective but is also needed to ensure broad support for economic reforms and to help sustain growth momentum," the IMF said.
The report said Venezuela, however, should put a check on its public largesse.
"In Venezuela, efforts will be needed to rein in government spending that has grown exceptionally rapidly in recent years in response to the surge in revenues from the oil sector," the IMF said.
The report added that labor productivity across the region has "lagged considerably" and called for reforms to boost productivity.The IMF has had a troubled history with Latin America in recent years, particularly with states such as Argentina.
Several countries, notably Brazil and Argentina, are displaying a new assertiveness toward the IMF now they have paid off their debts to the international lender.
They are likewise demanding that emerging market countries be given a bigger say in the decision-making at the IMF, which is still heavily dominated by the United States and Europe.
Among other key economies in the region, Argentina is expected to see growth cool to 7.5 percent in 2007 from 8.5 percent, and Mexico will slow to 3.4 percent from 4.8 percent, the IMF said.
Venezuela, which saw a rapid 10.6 percent expansion in 2006, will see a slower growth pace of 6.2 perent this year, the report projected.
AFP 11 1303 GMT 04 07
Copyright© 2007 AFP. All Rights Reserved.
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