Transcript of October 2018 Western Hemisphere Department Press Briefing
IMF News, October 13, 2018
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- Published: October 13, 2018
Regional growth and outlook
- Growth forecast for Latin America and the Caribbean marked down to 1.2 percent in 2018 and 2.2 percent in 2019.
- Private investment: after contracting for three years, private investment is estimated to have stopped being a major drag on growth in 2017, is gaining further strength in 2018, and is expected to accelerate in 2019.
- Medium-term per capita growth: the region is estimated to grow at about 1.9 percent in per capita terms over the medium term.
- Global comparison: question raised in the briefing referenced a world growth rate of 3.7 percent.
Divergent country developments and near-term drivers
- Argentina
- Recovery turned into negative growth as external headwinds were amplified by domestic vulnerabilities and characteristics.
- IMF reached a staff-level agreement on the first review of the Argentina program; expectation that the Board will meet before the end of this month to consider documents underpinning the standby arrangement.
- IMF view: the program will be based on an agreed framework aligned with the IMF’s current forecasts; no additional fiscal measures are required beyond those in the budget to achieve the zero primary balance given similar nominal GDP outcomes.
- Brazil
- Short-term prospects weighed down by the truckers' strike in May, tightening financial conditions, and election-related uncertainties.
- IMF note: privatization can be one element among many to address fiscal and growth challenges; case-by-case assessment of public assets and state-owned enterprises is essential.
- Mexico
- Lingering uncertainty on the final trade agreement in North America and tight financial conditions point to a more gradual recovery than previously expected.
- Incoming economic team: IMF observations that the proposed team has relevant experience; Central Bank independence emphasized; fiscal prudence and lowering public debt as stated objectives.
- Fiscal council: IMF reiterated that establishing an independent fiscal council could increase transparency and strengthen fiscal policy credibility.
- Venezuela
- Severe collapse in economic activity and a humanitarian crisis; IMF has not conducted an Article IV consultation since 2004 due to lack of timely statistics.
- IMF teams are piecing together available information to analyze the crisis and consider possible policy programs should a Venezuelan government engage with the international community.
- IMF sanctioned Venezuela’s authorities for not providing economic statistics in a timely manner; that process continues.
- IMF view: too little reliable information to prescribe specific stabilization strategies such as dollarization at this stage.
- Caribbean and Andean economies
- Some Andean economies benefited from better terms of trade and improved consumer and business confidence.
- Caribbean activity recovering, reflecting strong tourism uptake and robust U.S. growth.
- Nicaragua
- Forecasts: decline this year of about four percent in GDP and continued contraction next year of about one percent.
- Estimated job losses of about 110.000 so far (data through August).
- Observed declines in private consumption, exports, and investment; tourism, transportation, and trade severely affected.
- Contagion risks: possible migration spillovers and banking spillovers depending on how the situation evolves.
- Colombia
- IMF commented on a Central Bank strategy to accumulate reserves prudentially; the briefing noted a quoted IMF credit-line context and clarified the Fund is not revising Colombia’s credit line downward.
- Quota reference in the discussion: Colombia’s quota was mentioned as being around $1 billion (participant comment).
Key risks highlighted
- Faster tightening of international financial conditions and abrupt tightening in particular.
- These risks disproportionately affect countries with weak fundamentals and large foreign-currency financing needs (Argentina cited as an example).
- Strengthening trade tensions and heightened policy uncertainty.
- Uncertainty has weighed on investment (Mexico cited) and may erode potential trade-diversion gains.
- Information gaps and data withholding (Venezuela) hamper timely policy analysis and program design.
- Regional contagion channels from political crises: migration and banking links noted.
Policy recommendations and reform priorities
- Boost productivity and investment by:
- Increasing savings.
- Reducing misallocation of resources.
- Making labor markets more flexible and reducing informality.
- Liberalizing trade and fostering regional trade integration.
- Improving the business climate.
- Strengthening anti-corruption frameworks.
- Country-specific governance and structural advice:
- Brazil: restore fiscal discipline (including pension and public wage considerations), and consider privatization as one element among many, with case-by-case assessment of state-owned enterprises and public assets.
- Mexico: maintain and continue implementation of 2013 reforms (energy, education, competition); prioritize governance and anti-corruption measures; consider creating an independent fiscal council to enhance fiscal transparency and credibility.
- Nicaragua: monitor for regional spillovers and address collapse in consumption, exports, and investment.
- Venezuela: stabilization will require reliable data and a coherent program; IMF cannot specify a detailed strategy without better information.
Recent IMF program operations and engagements
- Barbados: IMF Board approved a program underpinned by significant strengthening of the policy framework and an important debt restructuring.
- Argentina: staff-level agreement reached on the first review of the program with significant revisions to strengthen financial aspects and the supporting policy framework.
- Venezuela: IMF continues analytical work using available information and participates in meetings to discuss policy design for recovery should a government engage; IMF Board sanctions remain in place for lack of timely data.
Transcript of October 2018 Western Hemisphere Department Press Briefing — IMF Communications Department