## Latin America and the Caribbean: Recent Developments, Outlook, and Policies

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### Recent Developments
- After a stronger-than-expected recovery from the pandemic and continued resilience in early 2023, economic growth in Latin America and the Caribbean (LAC) is softening as the effect of tighter policies to combat inflation is taking hold and the external environment is weakening.
- Drivers of the recent slowdown:
  - Early and swift monetary tightening across the region since 2021.
  - Withdrawal of most pandemic fiscal stimulus.
  - Reversal of external price pressures.
  - Weakened external conditions in recent months, including slowing growth in main trading partners and moderation in key commodity prices.
- Subregional dynamics:
  - LA5 (Brazil, Chile, Colombia, Mexico, Peru): decelerating activity, weaker private consumption, employment close to prepandemic trend, unemployment below historical average, labor force participation somewhat below prepandemic level partly because older workers left the workforce.
  - CAPDR (Central America, Panama, and the Dominican Republic): growth softened less than LA5; services resilient and supported by remittances.
  - Caribbean: tourism-dependent rebound moderating; commodity-exporting Caribbean economies benefit from favorable terms of trade.
  - Other South America: more pronounced slowdown driven by Argentina (partly due to drought) and idiosyncratic factors in Bolivia, Ecuador, and Uruguay; Paraguay showed a strong rebound from the 2022 drought.
- External environment indicators point to:
  - Declining exports momentum in 2023.
  - Moderating commodity prices.
  - Tight global financing conditions and rising global and domestic yields.

### Slowing Credit but Healthy Financial Systems
- Credit dynamics:
  - Credit growth continued decelerating in 2023, reflecting moderation in consumer credit and contraction in lending to firms.
  - Tighter credit supply conditions (lending standards) and weaker credit demand amid high interest rates and a slowing economy are contributing factors.
- Financial soundness:
  - Banks show solid profitability, liquidity, and capital adequacy.
  - High policy rates in LA5 have not materially affected banking system profitability, consistent with historically high pass-through from policy rates to lending rates, although higher lending rates may worsen credit quality.
  - Non-bank financial institutions and nonfinancial firms remain generally solid; firms’ returns declined since 2022 but remain comparable to pre-COVID-19 levels, and the share of firms with sustained negative returns remains low.
  - Aggregate household balance sheets in LAC remain in line with prepandemic levels.
- LA5-specific indicators and notes:
  - Financial soundness metrics in charts use percent tick marks: 0, 5, 10, 15, 20, 25, 30.
  - Indicator definitions: CAR = capital adequacy ratio; Liquidity = liquid assets to short-term liabilities; NPL = nonperforming loans to total loans; ROA = return on assets; ROE = return on equity.
  - Latest country data timing: Brazil: CAR: June 2023; NPLs/ROA/ROE: 2023:Q1; Liquidity: 2021:Q4. Chile: November 2022. Colombia: May 2023. Mexico: CAR: April 2023; NPLs/ROA/ROE: May 2023; Liquidity: March 2023. Peru: 2023:Q1.

### Price Pressures and Inflation Dynamics
- Headline inflation peaked at levels not seen since the mid-1990s in the second half of 2022 and has been declining since mid-2022.
- The decline is highly synchronized across subregions, pointing to the role of global inflation dynamics.
- Core inflation has started to ease but remains elevated in some countries amid strong labor markets and positive output gaps.
- LA5 specifics:
  - Brazil, Chile, and Mexico: headline inflation declined steadily since mid-2022; core inflation also falling but less rapidly.
  - Colombia and Peru: headline and core inflation started declining only recently.
- Drivers of easing core inflation:
  - Slower growth of core goods prices.
  - Core services inflation remains stickier.
  - Rapidly receding international prices and domestic currency appreciation have reduced import-price-driven inflation.

### Outlook and Key Projections
- LAC headline projection:
  - "After reaching 4.1 percent in 2022, LAC’s growth is projected to moderate to 2.3 percent in 2023 and bottom out in 2024."
- LA5 projections:
  - Real GDP growth: 2022: 3.7 percent; 2023: 2.6 percent; 2024: 1.9 percent.
  - End-of-period inflation (LA5): 2022: 7.8 percent; 2023: 5.1 percent; 2024: 3.6 percent.
- Regional LAC inflation aggregates:
  - "After reaching 7.8 percent in 2022, inflation in LAC (excluding Argentina and Venezuela) is anticipated to decline to 5.0 percent in 2023 and to 3.6 percent in 2024."
- Medium-term growth:
  - "Over the medium term, prospects for LAC’s growth remain subdued, and the region’s GDP is expected to expand annually at about 2½ percent, similar to its prepandemic historical average (1980–2019)."
  - Per capita medium-term projections: LAC: "1.7 percent annually over the medium term (2026–28)"; United States: "1.6 percent"; Emerging market and developing economies (excluding China): "2.7 percent."

### Risks to the Outlook
- Downside risks remain tilted to the downside though they have receded somewhat.
- External downside risks (verbatim):
  - "Lower growth in key trading partners—including due to a deeper-than-anticipated slowdown in China—could have important growth spillovers to the region through lower exports, commodity prices, remittances, and tourism."
  - "Greater commodity price volatility could lead to increased uncertainty about the path of key commodity prices for the region, affecting production, investment, and exports of commodity-dependent economies."
  - "New bouts of global inflationary pressures—including from an intensification of Russia’s war in Ukraine, weather-related shocks, or miscalibration of monetary policy by major central banks—could lead to higher food and fuel prices, especially if these shocks lead to supply disruptions. This could entail a resurgence of external inflationary pressures for LAC."
  - "Renewed turbulence in financial sectors of advanced economies, due to inflation surprises and further interest rate hikes, could trigger a tightening of financial conditions in LAC and currency depreciations, which would add to inflationary pressures in LAC."
  - "Heightened global geopolitical tensions could lead to higher commodity prices in the near term and increased restrictions on capital flows and trade over the medium term. While higher commodity prices could support economic activity in many LAC economies, they would exacerbate inflationary pressures. Increased restrictions on capital flows and trade could reduce external financing and adversely impact the region’s growth prospects. Geopolitical tensions would also impair global cooperation on common challenges, including climate change."
- Regional downside risks include reemergence of inflationary pressures; increased social tensions and violence; climate-related shocks (including El Niño impacts listed elsewhere).
- Upside risks: a more benign global environment; faster-than-anticipated decline in inflation; less scarring from recent shocks; growth in green minerals and energy sectors.

### Policy Recommendations
- Monetary policy:
  - Most central banks in the region are well placed to begin unwinding tight monetary policy stances as price pressures recede.
  - Guidance: focus on securing the return to low inflation by re-anchoring short-term inflation expectations and ensuring core inflation is firmly on a downward path while minimizing prolonged low growth risk.
  - Key considerations: pace of easing given monetary policy lags; assess impact of past tightening; preserve central bank independence and clear communication (explicit guidance such as an easing or tightening “bias”).
- Fiscal policy:
  - Rebuild fiscal policy space while protecting key social spending.
  - Preserve strong fiscal frameworks anchored by credible fiscal rules; evidence shows fiscal balances improved by 1.4 percentage points of GDP on average following adoption of fiscal rules.
  - Mobilize revenues, including strengthening personal income tax design and reducing informality; reduce spending inefficiencies to free fiscal space.
- Structural reforms and medium-term growth:
  - Address long-standing challenges: low productivity, low investment, and labor market rigidities that exacerbate informality.
  - Enhance trade, including within the region, by closing transport- and customs-related infrastructure gaps and improving logistics and customs efficiency.
  - Adapt to changing global landscape: energy transition opportunities for mineral-rich countries require investment-friendly frameworks; adoption of new digital technologies requires improvements in the quality of education.
  - Preserve social cohesion by strengthening social protection mechanisms and tackling insecurity.

### Nonfinancial Firms, External Sector, and Balance-sheet Vulnerabilities
- Nonfinancial firms:
  - Short-term risks to corporate balance sheets appear contained: firms generally have liquidity buffers to cover maturing debt in the near term.
  - Share of variable rate debt is low, limiting the impact of high interest rates, except in Brazil.
  - Measurement notes: figures based on long-term debt due in 2023–25 using 2022 balance sheet data; "cash and equivalents" defined as funds with maturities of less than three months; aggregate defined as total maturing long-term debt over total EBITDA and cash and cash equivalents.
- External sector:
  - Indicators generally strong, with healthy reserve levels complemented by precautionary credit lines in many cases.
  - Vulnerabilities include current account deficits and elevated public and external financing needs in some economies.
  - Figure 10 metrics shown as percent of GDP: Reserves, Foreign currency public debt, Public gross financing needs, Current account balance, External financing needs.

### Country Focus — Selected Country Projections and Risks (LA5 and Other South American Countries)
- Argentina:
  - Real GDP projected to contract by 2.5 percent in 2023.
  - Inflation projected to average 122 percent in 2023.
  - Downside risks dominate; strong implementation and ownership of IMF-supported program critical.
- Brazil:
  - Growth more resilient in 2023.
  - Central bank started easing with a 50 basis points cut in August.
  - Staff recommends a more ambitious fiscal effort; balance of risks improved.
- Bolivia:
  - Growth expected to weaken to 1.8 percent in 2023 (from 3.5 percent in 2022).
  - Inflation projected to rise to 3.6 percent by end-2023 and 3.8 in 2024.
- Chile:
  - Growth expected –0.5 percent in 2023, pick up to 1.6 percent in 2024.
  - Inflation projected to decelerate to 4.5 percent by end-2023 and converge to 3-percent target by end-2024.
  - Fiscal rule: (45 percent of GDP) debt ceiling referenced in fiscal context.
- Colombia:
  - Growth forecast 1.4 percent in 2023 and 2.0 percent in 2024.
  - Inflation expected to decline to 8.8 percent in 2023 and 4.5 percent in 2024.
- Ecuador:
  - Growth expected to slow amid political uncertainty and lower oil output.
  - Inflation easing since second half of 2022 and forecast to continue declining in 2023 and 2024.
- Mexico:
  - Growth projected at 3.2 percent in 2023.
  - Central bank announced a stable policy rate for an extended period; 2024 budget envisions a significant expansion followed by large consolidation in 2025.
- Paraguay:
  - GDP projected to grow by 4.5 percent in 2023.
  - Inflation projection trimmed from 4.5 to 4.1 percent for end-2023; target 4 percent.
- Peru:
  - Growth weaker than expected in 2023; inflation slowing and expected to return to the 1 to 3 percent target range in 2024.
  - Central bank would start easing monetary policy in 2023Q4.
- Uruguay:
  - Real GDP growth revised to 1 percent in 2023; rebound to 3.2 percent in 2024.
  - Central bank has started to ease monetary policy but stance remains appropriately contractionary.
- Venezuela:
  - Growth about 8 percent in 2022; growth expected to moderate in 2023.
  - About 7.3 million people (25 percent of the population) have fled the country since 2014.

### Output Gains from Closing Infrastructure and Security Gaps
- Infrastructure gains:
  - General equilibrium Armington trade model suggests infrastructure improvements that reduce trade costs can boost trade and output.
  - Numerical values shown in figure (percent increase in output relative to baseline): 4, 14, 12, 2, 0, 6, 10, 8.
- Security gains:
  - Reducing the gap in crime rates relative to the world by 20, 50, and 100 percent yields estimated impacts on GDP growth (percentage points): 1.0, 3.0, 2.5, 0.5, 0, 1.5, 2.0.
- Policy implications:
  - Public sectors alone may not finance needed investment; design investment frameworks and public-private partnerships that attract investment while raising fiscal revenues from natural resources.
  - Countries need affordable, long-term financing for climate mitigation and adaptation.
  - International support (including debt-for-nature swaps) and IMF instruments such as the Resilience and Sustainability Facility are relevant.
  - Invest in human capital and education quality to adapt to new technologies.
  - Broaden and strengthen social safety nets to protect those negatively impacted by transitions.

### Structural Reform Priorities
- Boosting productivity and investment:
  - Eliminate rigidities that curtail reallocation of productive resources and barriers to firm entry/exit (burdensome regulations, complex taxation, weak governance).
  - Reforms to foster innovation, reduce informality, and strengthen resilience.
- Trade integration:
  - Strengthen intra-regional trade and trade policy coordination; close transport and customs infrastructure gaps; streamline and digitize customs procedures; improve logistics and competition; encourage public-private partnerships.
- Crime and insecurity:
  - Crime and insecurity negatively affect productivity and growth; increase efficiency of security spending and continue poverty reduction efforts.
- Climate and digital transitions:
  - Manage tradeoffs for fossil-fuel-dependent countries; leverage critical mineral reserves for renewable energy systems with significant investments.
  - Improve education and social programs to support smooth green and digital transitions.

### Appendix — Selected Key Indicators (preserve reported values)
- Regional and country real GDP growth (year-over-year percent change) — selected entries:
  - Memorandum — Latin America and the Caribbean: –7.0; 7.3; 4.1; 2.3; 2.3
  - LAC (simple average): –9.3; 8.0; 7.4; 4.0; 3.7
  - Latin America 5: –6.1; 6.8; 3.7; 2.6; 1.9
  - Mexico: –8.7; 5.8; 3.9; 3.2; 2.1
  - Argentina: –9.9; 10.7; 5.0; –2.5; 2.8
  - Brazil: –3.3; 5.0; 2.9; 3.1; 1.5
  - Chile: –6.1; 11.7; 2.4; –0.5; 1.6
  - Peru: –11.0; 13.3; 2.7; 1.1; 2.7
  - Paraguay: –0.8; 4.0; 0.1; 4.5; 3.8
  - Guyana: 43.5; 20.1; 62.3; 38.4; 26.6
- Inflation (end of period; percent) — selected entries:
  - Memorandum — Latin America and the Caribbean: 6.3; 11.5; 14.6; 13.6; 8.8
  - LAC excluding Argentina and Venezuela: 3.5; 7.8; 7.8; 5.0; 3.6
  - Latin America 5: 3.5; 8.3; 7.8; 5.1; 3.6
  - Argentina: 36.1; 50.9; 94.8; 135.7; 69.5
  - Venezuela: 2,960; 686; 234; 250; 230
  - Mexico: 3.2; 7.4; 7.8; 4.5; 3.2
  - Colombia: 1.6; 5.6; 13.1; 8.8; 4.5
  - Peru: 2.0; 6.4; 8.5; 4.2; 2.2
- External current account balance (percent of GDP) — selected entries:
  - Memorandum — Latin America and the Caribbean: –0.4; –2.0; –2.4; –1.8; –1.5
  - Latin America 5: –0.5; –2.6; –3.0; –2.1; –2.0
  - Brazil: –1.9; –2.8; –2.8; –1.9; –1.8
  - Chile: –1.9; –7.3; –9.0; –3.5; –3.6
  - Colombia: –3.5; –5.6; –6.2; –4.9; –4.3
  - Peru: 1.1; –2.2; –4.1; –1.9; –2.1
  - Guyana: –16.3; –25.9; 23.8; 18.0; 20.0

*International Monetary Fund — Regional Economic Outlook: Western Hemisphere, October 2023 (figures and text excerpts as provided).*

### Preface ................................................................................................................

### Latin America and the Caribbean: Recent Developments, Outlook, and Policies

### Recent Developments
- After a stronger-than-expected recovery from the pandemic and continued resilience in early 2023, economic growth in Latin America and the Caribbean (LAC) is softening as the effect of tighter policies to combat inflation is taking hold and the external environment is weakening.
- Drivers of the recent slowdown:
  - Early and swift monetary tightening across the region since 2021.
  - Withdrawal of most pandemic fiscal stimulus.
  - Reversal of external price pressures.
  - Weakened external conditions in recent months, including slowing growth in main trading partners and moderation in key commodity prices.
- Subregional dynamics:
  - LA5 (Brazil, Chile, Colombia, Mexico, Peru): decelerating activity, weaker private consumption, employment close to prepandemic trend, unemployment below historical average, labor force participation somewhat below prepandemic level partly because older workers left the workforce.
  - CAPDR (Central America, Panama, and the Dominican Republic): growth softened less than LA5; services resilient and supported by remittances.
  - Caribbean: tourism-dependent rebound moderating; commodity-exporting Caribbean economies benefit from favorable terms of trade.
  - Other South America: more pronounced slowdown driven by Argentina (partly due to drought) and idiosyncratic factors in Bolivia, Ecuador, and Uruguay; Paraguay showed a strong rebound from the 2022 drought.
- External environment indicators summarized in figures (Figure 1, panels 1–4) point to:
  - Declining exports momentum in 2023.
  - Moderating commodity prices.
  - Tight global financing conditions and rising global and domestic yields.

### Slowing Credit but Healthy Financial Systems
- Credit dynamics:
  - Credit growth continued decelerating in 2023, reflecting moderation in consumer credit and contraction in lending to firms.
  - Tighter credit supply conditions (lending standards) and weaker credit demand amid high interest rates and a slowing economy are contributing factors.
- Financial soundness:
  - Banks show solid profitability, liquidity, and capital adequacy (Figure 3, panel 3).
  - High policy rates in LA5 have not materially affected banking system profitability, consistent with historically high pass-through from policy rates to lending rates (Figure 3, panel 4), although higher lending rates may worsen credit quality.
  - Non-bank financial institutions and nonfinancial firms remain generally solid; firms’ returns declined since 2022 but remain comparable to pre-COVID-19 levels, and the share of firms with sustained negative returns remains low (Figure 4, panel 1).
  - Aggregate household balance sheets in LAC remain in line with prepandemic levels (Figure 4, panel 2).

### Price Pressures Are Receding Gradually
- Inflation trends:
  - Headline inflation peaked at levels not seen since the mid-1990s in the second half of 2022 and has been declining since mid-2022 (Figure 5, panel 1).
  - The decline is highly synchronized across subregions, pointing to the role of global inflation dynamics.
  - Core inflation has started to ease but remains elevated in some countries amid strong labor markets and positive output gaps.
  - In LA5:
    - Brazil, Chile, and Mexico: headline inflation declined steadily since mid-2022; core inflation also falling but less rapidly.
    - Colombia and Peru: headline and core inflation started declining only recently.
  - Drivers of easing core inflation:
    - Slower growth of core goods prices.
    - Core services inflation remains stickier.
    - Rapidly receding international prices and domestic currency appreciation have reduced import-price-driven inflation (Figure 5, panels 3–5).

### Outlook and Risks
- Near-term projection:
  - Economic growth is projected to decline further in late 2023 and bottom out in 2024.
  - Inflation is projected to converge gradually toward central banks’ targets.
  - Over the medium term, LAC’s growth is projected to return to its low historical average.
- Risk assessment:
  - Downside risks have receded somewhat but remain tilted to the downside.
  - Key external downside risks: lower growth in main trading partners; commodity price volatility; new inflationary shocks; renewed turbulence in financial markets of large economies; intensification of geopolitical tensions.
  - Regional downside risks: reemergence of inflationary pressures; increased social tensions and violence; climate-related shocks.
  - Upside risks: a more benign global environment; faster-than-anticipated decline in inflation; less scarring from recent shocks; growth in green minerals and energy sectors.

### Policy Recommendations
- Monetary policy:
  - Most central banks in the region are well placed to begin unwinding tight monetary policy stances as price pressures recede.
- Fiscal policy:
  - Rebuild fiscal policy space while protecting key social spending.
- Structural policies to boost medium-term growth:
  - Address long-standing challenges: low productivity, low investment, and labor market rigidities that exacerbate informality.
  - Enhance trade, including within the region, to capture growth opportunities.
  - Adapt to changing global landscape:
    - Energy transition presents opportunities for mineral-rich countries; these countries will need investment-friendly frameworks.
    - Adoption of new digital technologies requires improvements in the quality of education.
  - Preserve social cohesion by strengthening social protection mechanisms and tackling insecurity.

### Additional Institutional and Production Notes
- The October 2023 Regional Economic Outlook: Western Hemisphere was prepared under supervision and guidance by named staff and reflects developments and staff projections through September 26, 2023.
- The report includes content from two background papers summarized in the chapter and available online.

*REGIONAL ECONOMIC OUTLOOK—Western Hemisphere, INTERNATIONAL MONETARY FUND • October 2023. This report reflects developments and staff projections through September 26, 2023.*

### 1. LA5: Real Credit Growth

### LA5: Real Credit Growth

### Real credit growth and credit conditions
- LA5: Real credit growth (year-over-year percent change) is presented in the source charts (visual scale from –4 to 8, and –2 to 6) and labeled "Real credit growth".
- Credit Conditions Index:
  - The credit conditions index ranges from –1 to 1.
  - Aggregate values (purchasing-power-parity GDP-weighted averages of Brazil, Chile, Colombia, and Mexico) appear in the charts on a scale including 0.4, –0.4, –0.2, 0.0, 0.2.
  - Note: The credit conditions index captures quarterly shifts in loan officers' perceptions of lending willingness (supply conditions) and observed demand (demand conditions). A higher supply index indicates reduced lending willingness by banks, while a higher demand index indicates decreased interest from borrowers.

### Financial soundness indicators (LA5)
- Financial soundness indicator metrics and ranges are shown in charts with exact numeric tick marks and scales including:
  - Percents: 0, 5, 10, 15, 20, 25, 30
  - Other axis scales present: 0, 6, 12, 18, 24, 4, 0, 1, 2, 3, 5, 0, 1, 2, 3, 4, 250, 0, 50, 100, 150, 200
- Indicator definitions (as provided in the source):
  - CAR = capital adequacy ratio
  - Liquidity = liquid assets to short-term liabilities
  - NPL = nonperforming loans to total loans
  - ROA = return on assets
  - ROE = return on equity
- Data timing and coverage notes:
  - Markers are purchasing-power-parity GDP-weighted averages; whiskers are the minimum-maximum range.
  - Chile is excluded from the Liquidity measure due to data limitations.
  - Latest data by country as reported:
    - Brazil: CAR: June 2023; NPLs/ROA/ROE: 2023:Q1; Liquidity: 2021:Q4
    - Chile: November 2022
    - Colombia: May 2023
    - Mexico: CAR: April 2023; NPLs:/ROA/ROE: May 2023; Liquidity: March 2023
    - Peru: 2023:Q1

### Historical impact of monetary policy rate changes on bank profitability
- Chart title: "Effect from 1 percent increase in policy rate; percent"
- Numeric values shown on the chart axis and markers include: 0.4, –0.2, –0.1, 0.0, 0.1, 0.2, 0.3
- Profitability measures in the accompanying visuals include:
  - Net interest margin
  - Provisions (flow)/loans
  - Profitability (return on assets)
- Country labels shown: BRA, CHL, COL, MEX, PER, USA

### Macro context: wages, profits, inflation, and policy actions
- Real wages:
  - "Real wages have recovered to prepandemic levels and are outpacing labor productivity, pointing to possible underlying price pressures."
- Corporate profits:
  - "An analysis of the components of the GDP deflator suggests that corporate profits have been an important contributor to inflation since 2021, although they have moderated recently."
- Monetary policy response:
  - "Real ex ante policy rates increased sharply, going deep into contractionary territory."
  - "Most central banks have maintained monetary policy interest rates unchanged well into 2023—on account of still-elevated core inflation and inflation expectations—some have started lowering nominal rates."
  - "The level of core inflation appears consistent with the magnitude of the shock to headline inflation."
- Fiscal policy:
  - "The timely withdrawal of the pandemic fiscal stimulus ... has also played a role in containing inflationary pressures."
  - "LAC’s pandemic fiscal stimulus has been unwound ... faster than in other EMs and AEs."

### Outlook: growth and inflation projections (selected values preserved exactly)
- LAC (Latin America and the Caribbean) headline statements:
  - "After reaching 4.1 percent in 2022, LAC’s growth is projected to moderate to 2.3 percent in 2023 and bottom out in 2024."
- LA5 (Brazil, Chile, Colombia, Mexico, Peru) projections (as reported in text and Table 1):
  - Real GDP growth:
    - 2022: 3.7 percent
    - 2023: 2.6 percent
    - 2024: 1.9 percent
  - End-of-period inflation (LA5):
    - 2022: 7.8 percent
    - 2023: 5.1 percent
    - 2024: 3.6 percent
- Regional LAC inflation aggregates:
  - "After reaching 7.8 percent in 2022, inflation in LAC (excluding Argentina and Venezuela) is anticipated to decline to 5.0 percent in 2023 and to 3.6 percent in 2024."
- Medium-term growth outlook:
  - "Over the medium term, prospects for LAC’s growth remain subdued, and the region’s GDP is expected to expand annually at about 2½ percent, similar to its prepandemic historical average (1980–2019)."
  - Per capita medium-term projections:
    - LAC: "1.7 percent annually over the medium term (2026–28)"
    - United States: "1.6 percent"
    - Emerging market and developing economies (excluding China): "2.7 percent"

### Risks to the outlook (external downside risks listed verbatim)
- "Lower growth in key trading partners—including due to a deeper-than-anticipated slowdown in China—could have important growth spillovers to the region through lower exports, commodity prices, remittances, and tourism."
- "Greater commodity price volatility could lead to increased uncertainty about the path of key commodity prices for the region, affecting production, investment, and exports of commodity-dependent economies."
- "New bouts of global inflationary pressures—including from an intensification of Russia’s war in Ukraine, weather-related shocks, or miscalibration of monetary policy by major central banks—could lead to higher food and fuel prices, especially if these shocks lead to supply disruptions. This could entail a resurgence of external inflationary pressures for LAC."
- "Renewed turbulence in financial sectors of advanced economies, due to inflation surprises and further interest rate hikes, could trigger a tightening of financial conditions in LAC and currency depreciations, which would add to inflationary pressures in LAC."
- "Heightened global geopolitical tensions could lead to higher commodity prices in the near term and increased restrictions on capital flows and trade over the medium term. While higher commodity prices could support economic activity in many LAC economies, they would exacerbate inflationary pressures. Increased restrictions on capital flows and trade could reduce external financing and adversely impact the region’s growth prospects. Geopolitical tensions would also impair global cooperation on common challenges, including climate change."

*Source: Regional Economic Outlook—Western Hemisphere, October 2023 (figures and text excerpts as provided).*

### 1. LA5: Headline and Target Inflation

### 1. LA5: Headline and Target Inflation

### Inflation Outlook and Risks
- Inflation is projected to decline gradually toward targets.
- The shaded area in figures shows the minimum-maximum range of headline inflation; markers refer to the 2025 and 2026 average inflation.
- Regional downside risks:
  - Monetary and fiscal policy slippages.
  - Reemergence of inflationary pressures from withdrawal of policies to contain food and energy prices (price caps, tax cuts, subsidies).
  - Social tensions.
  - Climate-related shocks, including El Niño impacts: floods in Ecuador and northern Peru; droughts in Colombia, Panama, and southern Peru (Online Annex 2).
  - Climate shocks also pose risks to CAPDR and the Caribbean via migration (Online Annex 3).
- Regional upside risks:
  - More benign global environment.
  - Faster-than-anticipated decline in inflation.
  - Less-than-anticipated scarring from recent shocks.
  - Less severe climate-related shocks.
  - Opportunity to boost the region’s production of green energy and minerals.
- Balance-sheet vulnerabilities could amplify downside risks:
  - Sovereign-bank nexus in some countries could trigger negative feedback loops (prolonged high monetary policy interest rates could exacerbate sovereign and private debt servicing difficulties).
  - Nonbank financial sector vulnerabilities are limited in most of the region but present in some smaller economies (Box 2).

### Nonfinancial Firms and Corporate Balance Sheets
- Short-term risks to corporate balance sheets appear contained:
  - Nonfinancial firms generally have liquidity buffers to cover maturing debt in the near term (Figure 9, panel 1).
  - The share of variable rate debt is low, limiting the impact of high interest rates, except in Brazil (Figure 9, panel 2).
- Notes on measurements:
  - Based on long-term debt due in 2023–25, according to latest balance sheet data in 2022.
  - Cash and equivalents refer to highly liquid funds in the form of cash, readily convertible deposits, and securities having maturities of less than three months.
  - Aggregate is total maturing long-term debt over total EBITDA and cash and cash equivalents in each country.
  - Share (over 100 percent) is the share of firms whose maturing debt exceeds 100 percent of the sum of EBITDA and cash and cash equivalents in each country.
  - Variable rate debt is the total amount of variable rate debt a company has outstanding.
- Country labels referenced: BRA CHL COL MEX PER.

### External Sector and Vulnerabilities
- External sector indicators generally strong, with healthy reserve levels complemented by precautionary credit lines in many cases.
- Vulnerabilities include current account deficits and elevated public and external financing needs in some economies (Figure 10).
- Figure 10 metrics (percent of GDP) include: Reserves, Foreign currency public debt, Public gross financing needs, Current account balance, External financing needs.
- Aggregates are purchasing-power-parity GDP-weighted averages; LA5 = Latin America 5 (Brazil, Chile, Colombia, Mexico, Peru).

### Policy Recommendations — Monetary Policy
- Monetary policy should focus on securing the return to low inflation by re-anchoring short-term inflation expectations and ensuring core inflation is firmly on a downward path while minimizing prolonged low growth risk.
- Key considerations for easing:
  - Pace of monetary easing and assessment of the impact of past tightening, as monetary policy operates with lags.
  - With headline inflation on a downward trend, core inflation slowing, and interest rates deep in contractionary territory, central banks can start easing monetary policy (Figure 11, panel 1). This process has already begun in countries where tightening started earlier or was more pronounced.
  - Absent new shocks, monetary policy easing would still allow for a gradual return of inflation toward inflation targets, although central banks should assess the optimal pace of easing.
- Tensions in monetary policy evaluation:
  - Full transmission of past monetary hikes is yet to be fully felt (Figure 11, panel 2); sustaining current policy rates or lowering them gradually could still entail additional monetary tightening as near-term inflation expectations move closer to the target.
  - Core inflation and near-term inflation expectations remain elevated.
  - Most professional forecasters expect inflation across LA5 economies will remain close to the upper bound of the target range well into 2024 (Figure 11, panel 3).
  - Most economies are operating above or close to potential, indicating central banks do not face a serious inflation-output tradeoff at this stage (Figure 11, panel 4).
  - Real wages are currently above prepandemic levels and labor markets are strong, so wage-driven price pressures cannot be ruled out.
  - Concerns about global inflation remain high.
- Central bank communication and credibility:
  - Central bank communication remains instrumental to the success of disinflation.
  - Explicit guidance (for example, an easing or tightening “bias”) and conveying expected inflation path and policy drivers help reduce uncertainty and anchor expectations.
  - Preserving central bank independence remains key to sustain credibility.

### Policy Recommendations — Fiscal Policy
- Fiscal policy should focus on rebuilding policy space to maintain fiscal sustainability and boost resilience against future shocks while protecting key social spending needs.
- Context:
  - Timely withdrawal of pandemic stimulus, rapid rebound in activity, and the inflation surprise helped contain COVID-19 impact on public finances in LAC.
  - Public debt remains high, including relative to other emerging market and developing economies, due to rapid rise preceding the pandemic (Figure 12, panels 1 and 2).
  - LAC’s public debt is projected to remain above peers, markedly so compared to peer countries with investment grade, by 2028.
- Fiscal plans and projections:
  - Most countries have plans to strengthen public finances and reduce debt over the medium term; these plans are ambitious compared to the region’s history (Figure 12, panel 3).
  - Primary balances are projected to improve somewhat over the medium term after some deterioration in 2023 (Figure 12, panel 4).
  - The pace of fiscal consolidation should weigh the strength of economic activity, the evolution of debt-servicing costs, and the evolution of public debt.
- Preserving social cohesion:
  - Maintain social cohesion as a centerpiece of fiscal consolidation given high poverty and inequality despite past progress (Figure 13).
  - Mobilize revenues, including strengthening personal income tax design and reducing informality.
  - Revisit social protection frameworks to be more responsive to income shocks and provide incentives for formalization (Background Paper 1 Summary).
  - Reduce spending inefficiencies and some expenditure items, varying by country, to free fiscal space.
- Fiscal rules and institutions:
  - Preserve strong fiscal frameworks anchored by credible fiscal rules to maintain discipline and achieve consolidation plans.
  - Evidence: fiscal balances improved by 1.4 percentage points of GDP on average following adoption of fiscal rules.
  - Opportunity to enhance frameworks by adopting transparent fiscal anchors, making rules flexible to respond to large shocks while balancing flexibility and credibility, designing rules around risk assessments (including changes in borrowing capacity), and strengthening fiscal institutions.

### Structural Reforms and Longer-term Challenges
- Long-standing growth challenges: lackluster productivity and low investment.
- Policymakers should develop comprehensive medium-term strategies that account for social demands.
- Boosting productivity and investment:
  - Eliminate rigidities that curtail reallocation of productive resources (including labor) and barriers to firm entry/exit (burdensome regulations, complex and distortive taxation, weak governance).
  - Reforms would foster innovation, reduce informality, and strengthen resilience to adverse shocks.
- Trade integration:
  - Trade integration is a largely untapped engine of growth with sizable potential gains.
  - Improvements in transportation infrastructure and customs efficiency can significantly boost integration within and outside the region and increase aggregate output while mitigating risks from global fragmentation (Figure 14, panel 1; Background Paper 2 Summary).
- Crime, insecurity, and productivity:
  - Crime and insecurity have significant negative effects on productivity, capital accumulation, and growth.
  - Strengthening domestic security could meaningfully bolster growth (Figure 14, panel 2; Online Annex 4).
  - With high spending on law and order and limited fiscal space, authorities should increase efficiency of security spending and continue poverty reduction efforts.
- Climate transition and digital challenges:
  - Policymakers must confront the global transition to a low-carbon economy and rapidly evolving digital technologies.
  - Tackling climate challenges requires weighing costs versus benefits of climate policy.
  - Countries dependent on fossil fuel revenues face tradeoffs between scaling down fossil fuel investment to contain transition risks and investing to secure higher revenues.
  - Energy transition opportunities: leverage reserves of critical minerals needed for renewable energy systems (Figure 15, panel 1); reaping benefits requires significant investments.
- References to analytical work and background:
  - See Background Paper 1 Summary; October 2022 Regional Economic Outlook: Western Hemisphere Background Paper 3; October 2021 Regional Economic Outlook: Western Hemisphere Background Paper 2; October 2023 Fiscal Monitor.

*International Monetary Fund — Latin America and the Caribbean: Recent Developments, Outlook, and Policies (October 2023)*

### 1. Output Gains from Closing Infrastructure Gap

### 1. Output Gains from Closing Infrastructure Gap

### Gains from Infrastructure Improvements
- Improving infrastructure can boost trade and output.
- Based on general equilibrium Armington trade model where infrastructure improvements reduce trade costs.
- Regional groupings referenced: LAC, South America, Central America, Caribbean.
- Numerical values shown in figure (percent increase in output relative to baseline): 4, 14, 12, 2, 0, 6, 10, 8.
- Note: UNODC includes both official data from national authorities and other sources approved by UN member states.

### Gains from Reducing Security Gaps
- Addressing crime can also bolster LAC’s growth.
- Estimates of the impact on GDP growth from reducing the gap in crime rates relative to the world (by 20, 50, and 100 percent) are reported.
  - A 20 percent gap reduction means that the distance between each country’s 2017–19 average homicide rate and the world average is reduced by 20 percent.
- Numerical values shown in figure (percentage points of GDP growth): 1.0, 3.0, 2.5, 0.5, 0, 1.5, 2.0.

### Policy Implications and Recommendations
- Public sectors alone may not be able to finance needed investment; designing investment frameworks—including partnerships between public and private sectors—that credibly balance the need to attract investment and to raise fiscal revenues from natural resources to finance pressing government priorities (including social spending and investment) is a key priority for policymakers in the region.
- Countries will need affordable, long-term financing to implement climate mitigation and adaptation policies.
- Some novel initiatives are already making waves, including recent debt-for-nature swaps.
- More support from the international community will be needed.
- The IMF stands ready to continue supporting countries in the region, including with its Resilience and Sustainability Facility, which is intended to help low-income and vulnerable middle-income countries address longer-term challenges such as climate change and pandemic preparedness, enhancing sustainable growth, and prospective balance of payments stability—as well as with policy advice and technical assistance.
- Adapting to new technologies requires investing in human capital through comprehensive education strategies aimed at strengthening quality of education, equalizing access, and adapting existing programs to the new reality of the labor market.
- Further improvements in social safety nets, including by broadening their coverage and strengthening the insurance aspect of social programs, will be key to protect those negatively impacted by these changes and allow for a smoother green and digital transition.
- Many priorities will require government support and will need to be weaved in their medium-term fiscal plans without jeopardizing fiscal policy objectives.

*International Monetary Fund. Latin America and the Caribbean: Recent Developments, Outlook, and Policies (October 2023), Figure 14 and accompanying text.*

### Box 3. Latin America 5 and Other South American Countries: Country Focus

### Box 3. Latin America 5 and Other South American Countries: Country Focus

### Country-by-country macro outlook and risks
- Argentina
  - Real GDP projected to contract by 2.5 percent in 2023 on account of the severe drought.
  - Inflation projected to average 122 percent in 2023; outcome dependent on exchange rate passthrough and degree of policy tightening.
  - Downside risks dominate reflecting fragile economic and social situation, election-related uncertainties, and vulnerabilities to external shocks.
  - Strong implementation and ownership of the IMF-supported program critical to safeguard stability and address lingering macroeconomic imbalances.

- Brazil
  - Growth more resilient than expected in 2023.
  - Central bank started easing with a 50 basis points cut in August while maintaining an adequately tight stance.
  - Authorities committed to improve the fiscal position guided by the new fiscal rule (ceiling on real spending growth contingent on revenue collection and meeting the primary balance target).
  - Staff recommends a more ambitious fiscal effort, anchored in an enhanced framework that builds on the new rule to put debt on a firmly declining path.
  - Structural policies focused on fostering more sustainable, inclusive, and green growth.
  - Balance of risks has considerably improved.

- Bolivia
  - Growth expected to weaken in 2023–24 to 1.8 percent (from 3.5 percent in 2022) reflecting persistent declines in natural gas production, financing constraints on public investment, and slowdown in credit growth.
  - Risks from low international reserves and political tensions remain elevated.
  - Inflation projected to rise to 3.6 percent by the end of 2023 and 3.8 in 2024, with upside risk from currency weakness.
  - Need for credible medium-term fiscal adjustment to ensure debt sustainability and restore reserve adequacy, while protecting vulnerable groups and ensuring a minimum level of productive public investment.
  - Recommendation to advance supply-side reforms to encourage private domestic and foreign investment and diversify exports away from hydrocarbons.

- Chile
  - Growth expected to be –0.5 percent in 2023, reflecting adjustment of domestic demand after overheating in 2021–22.
  - Growth projected to pick up to 1.6 percent in 2024, supported by exports and recovery of private consumption.
  - Main risk: possible abrupt global slowdown and sharply tighter global financial conditions affecting commodity prices and capital flows.
  - Inflation projected to decelerate to 4.5 percent by the end of 2023 and to converge to the 3-percent target by the end of 2024.
  - Monetary policy expected to continue to loosen as price pressures ease.
  - Fiscal stance: small positive impulse in 2023, set to gradually tighten in 2024 and thereafter, guided by the structural balance rule and the (45 percent of GDP) debt ceiling.

- Colombia
  - Economy gradually slowing after overheating in 2021–22; domestic demand and services more resilient than expected.
  - Growth forecasted to be 1.4 percent in 2023 and 2.0 percent in 2024 on the back of tight macroeconomic policies and less favorable external conditions.
  - Inflation expected to decline to 8.8 percent in 2023 and 4.5 percent in 2024.
  - Maintaining a tight policy stance necessary to durably reduce inflation and external imbalances and ensure convergence toward a sustainable growth path.

- Ecuador
  - Following a strong 2022, growth expected to slow amid political uncertainty, lower oil output, worsening security, and El Niño-related natural disasters.
  - Downside near-term risks include a more severe El Niño, further decrease in oil production, and tighter global financial conditions.
  - Inflation easing since second half of 2022 and forecasted to continue declining in 2023 and 2024.
  - Fiscal position weakened since late 2022; strengthening fiscal discipline and reinvigorating reform momentum in 2023 and beyond are key to cement fiscal and debt sustainability and gradually reestablish market access.

- Mexico
  - Growth projected at 3.2 percent in 2023, outperforming expectations.
  - Delayed recovery from COVID-19 now broad-based with contact-intensive services and construction leading.
  - Labor market very strong; inflation receding due to lower global commodity prices and early monetary policy reaction.
  - Central bank committed to keeping inflation in check and announced a stable policy rate for an extended period, implying a tightening in real terms.
  - 2024 budget envisions a significant expansion in the fiscal stance followed by a large fiscal consolidation in 2025; authorities face stark choices to comply with the targeted medium-term fiscal path.
  - Mexico well placed to benefit from nearshoring but needs deeper structural reforms to attract more foreign firms (policies to facilitate labor participation of women, tackle crime, reduce regulatory hurdles, expand access to finance, and reduce costs of formalization).

- Paraguay
  - Firmly recovering from the 2021–22 drought; GDP projected to grow by 4.5 percent in 2023 led by resurgence in agriculture and electricity generation.
  - Central bank instrumental in controlling price pressures; inflation projection trimmed from 4.5 to 4.1 percent for end-2023, in line with the 4 percent inflation target.
  - Fiscal position improved since 2020; government committed to reducing fiscal deficit to 1.5 percent of GDP in the next few years per the Fiscal Responsibility Law, though gradual convergence will take longer than previously expected.

- Peru
  - Growth weaker than expected in 2023 due to severe climate shocks (El Niño Costero), weak private investment, and lingering political uncertainty after social unrest.
  - Subdued global growth, additional adverse climate shocks (ENSO), tighter global financial conditions, and continued political uncertainty would weigh on growth in 2024.
  - Inflation slowing and expected to return to the 1 to 3 percent target range in 2024.
  - Central bank would start easing monetary policy in 2023Q4.
  - Fiscal deficit would remain within the fiscal rule limit in 2023, reflecting a small fiscal impulse; a negative fiscal impulse (some fiscal consolidation) required in 2024 to remain within the fiscal rule limit.

- Uruguay
  - Real GDP growth revised to 1 percent in 2023 due to most severe drought in decades, with a moderate rebound to 3.2 percent in 2024.
  - Inflation has fallen into the target range aided by tight monetary policy and appreciation of the peso.
  - Central bank has started to ease monetary policy but stance remains appropriately contractionary.
  - Fiscal policy marginally looser in response to drought; public debt expected to remain largely stable.
  - Strong macroeconomic performance has resulted in the lowest spreads in the region and an improvement in Uruguay’s credit rating by all major rating agencies.

- Venezuela
  - After shrinking to one-fifth of the size it had 10 years ago, fragile stabilization stopped the economy's free fall in 2021.
  - Favorable domestic demand and gradual recovery of oil production drove growth to about 8 percent in 2022, but growth expected to moderate in 2023 due to external sector headwinds and renewed inflationary pressures despite ramped-up foreign exchange interventions.
  - Country remains in a deep economic, political, and humanitarian crisis, with about 7.3 million people (25 percent of the population) fleeing the country since 2014.

### Regional themes: income volatility and social insurance (Background Paper 1)
- Historical patterns and recent trends
  - Latin America has historically had aggregate income volatility higher than other EMs and twice as high as AEs.
  - Aggregate income volatility in Latin America has experienced a marked reduction in the last two decades.
  - Variance decomposition indicates the reduction can be largely explained by domestic factors—pointing to better macroeconomic policies—which more than offset the rise in volatility due to external factors.

- Individual-level volatility and vulnerabilities
  - Labor market surveys indicate that on average about 22 percent of the labor force experience income losses greater than 25 percent each year.
  - Groups particularly vulnerable to large income fluctuations: older, less educated, poorer, and informal workers.
  - Less educated and informal workers face substantial risk of falling into poverty after large income losses and are more sensitive to aggregate income fluctuations.

- Role and limitations of social transfers
  - Social transfers have very limited role in mitigating large income losses for workers; large income losses are generally not mitigated by these transfers.
  - Social transfers help alleviate poverty, but systems often lack mechanisms to support workers at times of temporary income loss because coverage of unemployment protection is very low.

- Policy implications
  - Better macroeconomic policies have helped reduce aggregate income volatility.
  - Governments should revisit coverage of social insurance programs (e.g., unemployment savings accounts, unemployment insurance) and the design of social assistance programs so they respond more quickly to income shocks.
  - Social insurance schemes should protect not only the poor but also those at risk of falling into poverty to maintain social cohesion amid larger and more frequent shocks (e.g., climate change or geoeconomic fragmentation).

### Regional themes: trade integration and global fragmentation (Background Paper 2)
- Trade integration patterns and obstacles
  - LAC’s total trade (exports plus imports) stands at less than 50 percent of its GDP.
  - Exports concentrated in a few sectors (mostly primary commodities) with limited integration into global value chains and strong ties to the US, EU, and China.
  - Region relies heavily on imported investment goods, with China an increasingly dominant source of machinery products.
  - Despite progress lowering trade barriers, LAC trades considerably less than comparable countries, especially at the intra-regional level, in both goods and services.
  - Poor infrastructure, low quality of human capital, and inadequate governance are key obstacles preventing higher trade integration.
  - Potential gains from closing transport- and customs-related infrastructure gaps are sizable for boosting trade and output, including greater integration into global value chains and intra-regional trade.
  - Infrastructure investments can entail potentially large costs and require case-by-case analysis, observing fiscal constraints and creating an environment conducive to private investment.

- Opportunities amid global changes
  - LAC’s reserves of critical minerals needed for the green transition present an opportunity to boost trade and output; South American countries with large reserves include Chile, Peru, Brazil, Mexico, and Argentina.
  - Geopolitical tensions increase risks of trade fragmentation—a split of the global economy into competing blocs—which could reverse globalization gains, disrupt trade and financial flows, and reduce global GDP.

- Scenarios and implications
  - LAC is relatively well placed to withstand a mild scenario of global trade fragmentation where trade barriers are erected only among large economies and LAC’s trade ties remain intact.
  - In more extreme scenarios where trade between global economic blocs halts, LAC could face sizable costs from loss of major export destinations.
  - Reliance on imported capital goods from China means extreme fragmentation scenarios could raise the cost of capital and substantially impact the region’s development, including the green energy transition.

- Policy recommendations
  - Strengthen trade integration, including intra-regional trade and trade policy coordination among LAC countries.
  - Reduce trade barriers, close infrastructure gaps, and implement policies that make LAC an attractive investment destination to boost trade and growth and mitigate risks from global fragmentation.
  - Examples of policies to close infrastructure gaps: streamlining, automating, and digitizing customs procedures; reducing bureaucratic red tape; adopting electronic data interchange systems; investing in integration of different transport modes; developing an efficient logistics sector by encouraging competition and public-private partnerships; and training customs and transportation personnel.

*Prepared by the Latin America 5 (Brazil, Chile, Colombia, Mexico, Peru) and other South American country teams; Regional Economic Outlook—Western Hemisphere, October 2023.*

### Appendix Table 1. Western Hemisphere: Main Economic Indicators¹

### Appendix Table 1. Western Hemisphere: Main Economic Indicators¹

### Real GDP Growth (Year-over-year percent change)
- North America: –3.5; 5.8; 2.3; 2.1; 1.5
- Canada: –5.1; 5.0; 3.4; 1.3; 1.6
- Mexico: –8.7; 5.8; 3.9; 3.2; 2.1
- United States: –2.8; 5.9; 2.1; 2.1; 1.5
- Puerto Rico: –4.4; 0.2; 2.0; –0.7; –0.2
- South America: –6.3; 7.5; 3.8; 1.6; 2.0
- Argentina: –9.9; 10.7; 5.0; –2.5; 2.8
- Bolivia: –8.7; 6.1; 3.5; 1.8; 1.8
- Brazil: –3.3; 5.0; 2.9; 3.1; 1.5
- Chile: –6.1; 11.7; 2.4; –0.5; 1.6
- Colombia: –7.3; 11.0; 7.3; 1.4; 2.0
- Ecuador: –7.8; 4.2; 2.9; 1.4; 1.8
- Paraguay: –0.8; 4.0; 0.1; 4.5; 3.8
- Peru: –11.0; 13.3; 2.7; 1.1; 2.7
- Uruguay: –6.3; 5.3; 4.9; 1.0; 3.2
- Venezuela: –30.0; 1.0; 8.0; 4.0; 4.5
- CAPDR: –7.2; 11.2; 5.4; 3.8; 3.9
- Costa Rica: –4.3; 7.8; 4.3; 4.4; 3.2
- Dominican Republic: –6.7; 12.3; 4.9; 3.0; 5.2
- El Salvador: –7.9; 11.2; 2.6; 2.2; 1.9
- Guatemala: –1.8; 8.0; 4.1; 3.4; 3.5
- Honduras: –9.0; 12.5; 4.0; 2.9; 3.2
- Nicaragua: –1.8; 10.3; 3.8; 3.0; 3.3
- Panama: –17.7; 15.8; 10.8; 6.0; 4.0
- Caribbean: Tourism Dependent: –14.6; 9.1; 9.0; 3.2; 2.3
- Caribbean: Non-Tourism Dependent: 0.7; 2.5; 17.1; 13.6; 11.6
- Haiti: –3.3; –1.8; –1.7; –1.5; 1.4
- Commodity Exporters: 3.0; 4.8; 25.4; 19.3; 15.0
- Guyana: 43.5; 20.1; 62.3; 38.4; 26.6
- Suriname: –15.9; –2.7; 1.0; 2.1; 3.0
- Trinidad and Tobago: –9.1; –1.0; 1.5; 2.5; 2.2
- Memorandum — Latin America and the Caribbean: –7.0; 7.3; 4.1; 2.3; 2.3
- LAC (simple average): –9.3; 8.0; 7.4; 4.0; 3.7
- LAC excluding Argentina and Venezuela: –6.2; 7.1; 4.0; 2.8; 2.2
- Latin America 5: –6.1; 6.8; 3.7; 2.6; 1.9
- Eastern Caribbean Currency Union: –16.9; 6.0; 9.9; 4.7; 4.0

### Inflation (End of period; percent)
- North America: 1.7; 7.2; 6.6; 3.1; 2.6
- Canada: 0.8; 4.7; 6.6; 2.7; 2.1
- Mexico: 3.2; 7.4; 7.8; 4.5; 3.2
- United States: 1.6; 7.4; 6.4; 3.0; 2.6
- Puerto Rico: –0.1; 4.2; 6.2; 1.1; 1.9
- South America: 8.0; 14.1; 18.3; 19.1; 11.9
- Argentina: 36.1; 50.9; 94.8; 135.7; 69.5
- Bolivia: 0.7; 0.9; 3.1; 3.6; 3.8
- Brazil: 1.5; 4.5; 10.1; 5.8; 4.9
- Chile: 2.9; 7.1; 12.8; 4.5; 3.0
- Colombia: 1.6; 5.6; 13.1; 8.8; 4.5
- Ecuador: –0.9; 1.9; 3.7; 2.4; 1.5
- Paraguay: 2.2; 6.8; 8.1; 4.1; 4.1
- Peru: 2.0; 6.4; 8.5; 4.2; 2.2
- Uruguay: 3.2; 9.4; 8.0; 8.3; 5.4
- Venezuela: 2,960; 686; 234; 250; 230
- CAPDR: 2.8; 5.1; 7.3; 3.4; 3.5
- Costa Rica: 3.2; 0.9; 3.3; 7.9; –0.9
- Dominican Republic: 5.2; 5.6; 8.5; 7.8; 4.0
- El Salvador: 1.9; –0.1; 6.1; 7.3; 3.1
- Guatemala: 4.8; 3.1; 9.2; 5.4; 4.6
- Honduras: 3.2; 4.0; 5.3; 9.8; 5.3
- Nicaragua: 2.9; 7.2; 11.6; 7.6; 4.8
- Panama: 4.0; –1.6; 2.6; 2.1; 2.2
- Caribbean: Tourism Dependent: 2.3; 2.5; 5.2; 7.4; 4.1
- Caribbean: Non-Tourism Dependent: 14.4; 11.8; 20.4; 13.0; 7.4
- Haiti: 25.2; 13.1; 38.7; 30.1; 12.7
- Commodity Exporters: 8.6; 11.1; 13.0; 7.2; 5.6
- Guyana: 6.0; 9.5; 7.2; 3.8; 5.5
- Suriname: 60.7; 60.7; 54.6; 40.0; 20.0
- Trinidad and Tobago: 0.8; 3.5; 8.7; 3.5; 2.3
- Memorandum — Latin America and the Caribbean: 6.3; 11.5; 14.6; 13.6; 8.8
- LAC (simple average): 5.3; 8.2; 12.5; 10.0; 6.1
- LAC excluding Argentina and Venezuela: 3.5; 7.8; 7.8; 5.0; 3.6
- Latin America 5: 3.5; 8.3; 7.8; 5.1; 3.6
- Eastern Caribbean Currency Union: –0.0; 2.7; 6.4; 3.3; 2.3

Notes on inflation: Consumer price index (CPI) inflation aggregates exclude Venezuela and are geometric purchasing-power-parity GDP-weighted averages.

### External Current Account Balance (Percent of GDP)
- North America: –2.5; –3.2; –3.4; –2.7; –2.6
- Canada: –2.2; –0.3; –0.3; –1.0; –1.0
- Mexico: 2.0; –0.6; –1.2; –1.5; –1.4
- United States: –2.8; –3.6; –3.8; –3.0; –2.8
- Puerto Rico: 1.1; 0.9; ...............
- South America: –1.2; –2.5; –3.0; –1.9; –1.6
- Argentina: 0.7; 1.4; –0.7; –0.6; 1.2
- Bolivia: –0.0; 2.1; –0.4; –2.7; –3.3
- Brazil: –1.9; –2.8; –2.8; –1.9; –1.8
- Chile: –1.9; –7.3; –9.0; –3.5; –3.6
- Colombia: –3.5; –5.6; –6.2; –4.9; –4.3
- Ecuador: 2.9; 3.2; 2.4; 1.5; 1.6
- Paraguay: 3.6; –0.8; –6.0; 0.6; 0.1
- Peru: 1.1; –2.2; –4.1; –1.9; –2.1
- Uruguay: –0.8; –2.5; –3.5; –3.7; –3.3
- Venezuela: –3.5; –1.2; 3.6; 2.2; 3.4
- CAPDR: –1.0; –1.9; –3.2; –2.2; –2.1
- Costa Rica: –3.0; –1.0; –2.5; –3.7; –2.8
- Dominican Republic: –1.7; –2.8; –5.6; –3.7; –3.5
- El Salvador: 1.6; –4.3; –6.6; –4.5; –4.5
- Guatemala: 2.2; 0.2; 1.4; 2.4; 1.8
- Honduras: –2.8; –4.7; –3.2; –5.2; –4.9
- Nicaragua: –3.1; –1.3; 2.1; 0.2; 0.2
- Panama: –0.3; –3.0; –3.9; –3.6; –3.2
- Caribbean: Tourism Dependent: –10.7; –8.8; –6.6; –5.1; –4.8
- Caribbean: Non-Tourism Dependent: –4.5; 1.8; 12.3; 5.2; 6.8
- Haiti: –2.3; –2.9; –2.3; (no projection shown)
- Commodity Exporters: –7.0; 2.6; 18.5; 9.6; 11.5
- Guyana: –16.3; –25.9; 23.8; 18.0; 20.0
- Suriname: 9.0; 5.9; 2.2; 1.5; 1.0
- Trinidad and Tobago: –6.7; 11.3; 17.9; 5.7; 7.1
- Memorandum — Latin America and the Caribbean: –0.4; –2.0; –2.4; –1.8; –1.5
- LAC (simple average): –5.0; –5.1; –3.6; –3.0; –2.5
- LAC excluding Argentina and Venezuela: –0.4; –2.4; –2.8; –2.0; –1.8
- Latin America 5: –0.5; –2.6; –3.0; –2.1; –2.0
- Eastern Caribbean Currency Union: –16.4; –15.1; –13.4; –11.3; –10.2

*Sources: IMF, World Economic Outlook database; and IMF staff calculations and projections. Consistent with the IMF World Economic Outlook, the cutoff date for the data and projections in this table is September 25, 2023.*

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_Source: https://www.imf.org/-/media/files/publications/reo/whd/2023/october/english/text.pdf_