Western Hemisphere Region
Crisis Averted—What’s Next?
©2012 International Monetary Fund
Growth in the Latin America and Caribbean (LAC) region has softened since our April report, reflecting the larger-than-anticipated impact of earlier policy tightening and the somewhat less favorable external environment. Global downside risks have increased, as the crisis in Europe continues to simmer, and the U.S. fiscal cliff looms. Nevertheless, with slack in many countries limited, and the twin tailwinds of external finance and commodity prices still stimulative, policies need to be carefully calibrated to keep domestic demand and credit growth in check. The key task for many countries remains to strengthen the resilience of their economies by rebuilding fiscal buffers and safeguarding financial stability. Challenges are more pressing in some countries, particularly those in the Caribbean, where the recovery has been held back by weak balance sheets and external demand.