Press Rlease: IMF Says Despite Downside Risks, Latin America and Caribbean Prepared to Endure Global Shocks
October 11, 2008Press Release No. 08/247
October 11, 2008
The International Monetary Fund (IMF) said today that despite downside risks, many countries in Latin America and the Caribbean were better prepared to deal with the current global shocks better than in previous crises. "This reflects the progress many countries in the region have made in improving their macroeconomic fundamentals," Anoop Singh, Director of the Western Hemisphere Department, said during a press conference ahead of the IMF and World Bank Annual Meetings.
"Policy makers in the region remain on very high alert to dealing with the current shocks as well as additional risks such as volatile commodity prices," Mr. Singh said. While lower food and fuel prices would bring welcome relief for some countries, in particular low-income commodity importers in Central America and many Caribbean countries, strong commodity prices have been a major factor in bolstering fiscal and external positions and driving growth in the whole region in recent years, Mr. Singh said. "A further sharp fall would have considerable adverse implications for the regions' fiscal and external positions," he added.
The World Economic Outlook released on October 8 projects growth in the Western Hemisphere at 4.6 percent in 2008 and 3.2 percent in 2009 after 5.6 percent in 2007.
Mr. Singh said that the essential priorities for the region include preserving the proper and efficient functioning of financial systems by pre-emptively addressing risks from liquidity and asset quality. "We see policy makers firmly oriented toward this end," Mr. Singh said, adding that many countries have built up considerable foreign exchange buffers that could be used to deal with exceptional and temporary shocks.
Furthermore, he said, it is important to preserve the hard-won gains on inflation. Central banks will need to keep inflation expectations well anchored by maintaining active communication with markets on policy challenges and measures. "This is especially important for countries where domestic demand has been growing well above target," Mr. Singh said.
Mr. Singh noted that fiscal situations will likely come under stress at a time when there will be increased need to maintain a robust safety net for those low-income households who would be affected by the slowdown. "This will require a much more targeted strategy for fiscal spending to ensure that essential needs can be met while containing any additional financing needs," he added.
The Fund continues close contacts with policy makers across the region, Mr. Singh said and "stands ready to extend financial assistance should this become necessary."
The IMF's half-yearly Regional Economic Outlook on the Western Hemisphere region will be released October 22 in Santiago, Chile, and October 23 in Mexico City.