Press Briefing Transcript: Western Hemisphere Department, Spring Meetings 2025
IMF News, April 26, 2025
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- Published: April 26, 2025
Regional economic outlook — headline projections and heterogeneity
- Average growth for Latin America and the Caribbean expected to slow from 2.4 percent last year to 2 percent in 2025 — against 2.5 that was expected six months ago — and thereafter edge back to 2.4 percent.
- Activity has been largely consumption-driven amid resilient labor markets; slower global growth, elevated uncertainty, the impact of tariffs and tighter domestic policies in some countries will weigh on growth.
- Behind the regional average there is significant heterogeneity:
- Mexico: GDP expected to decline slightly this year (noted as more affected by U.S. trade policies).
- Brazil: A relevant deceleration expected, driven by tighter domestic policies.
- Argentina and Ecuador: With IMF-supported programs, an important rebound is expected this year.
- Suriname: successfully completed the last review of its program since the prior R E O.
- Most countries will not reach inflation targets before 2026.
Inflation dynamics and risk balance
- Convergence to inflation targets in 2024 was relatively slow; fading global disinflation and exchange rate depreciation in the region contributed.
- Outlook: declining inflation should continue, but outcomes are ambiguous and country-specific.
- IMF assessment of risk directions:
- Downside risks to growth.
- Upside risks to inflation, with the balance depending on global developments and domestic fiscal risks.
- Mechanisms creating ambiguity:
- Tariffs act as a negative demand shock (putting downward pressure on prices).
- Value chain disruptions create negative supply shocks (putting upward pressure on prices).
- Accelerations in global growth could raise commodity demand and prices, indirectly affecting inflation via exchange rate depreciation.
Global spillovers, U.S. immigration, and remittances
- IMF baseline incorporates a significant decline in immigration flows into the U.S.; undocumented immigration is assumed to go basically to zero on a net basis while documented immigration continues.
- Recent annual inflows into the U.S. over the last couple of years: somewhere between three and three and a half million new foreign individuals; only around 20 percent of those come through formal immigration channels (green cards, formal visas).
- Expected macro effects for the U.S. and the region:
- Loss of an important disinflationary force in the U.S. labor market that had helped reduce wage growth and lower inflation.
- Reduced demand-side contribution (housing, consumption) from immigrant inflows.
- Concentrated labor shortages and tighter labor markets likely in sectors such as retail, construction, and agriculture.
- For Central America and Mexico (Central America relatively more affected): remittances are expected to decline going forward, although short-run data show remittances increasing (assessed largely as temporary). Declining remittances imply effects on consumption and economic activity and create absorption challenges for returning migrants — both risks and opportunities.
Policy guidance — macro frameworks and priorities
- Core message: countries must continue strengthening economic resilience by reinforcing macroeconomic frameworks that are working and preserving policy credibility.
- Fiscal policy:
- Continue rebuilding fiscal buffers and broad policy buffers; many countries have high public debt and face rising financing costs amid low growth.
- Fiscal consolidation should continue without delays, while protecting priority public spending and social spending.
- This is not the moment to alter policy frameworks or abandon fiscal plans; certainty is essential.
- Monetary policy:
- Heterogeneity across the region: some central banks tightening, others easing.
- Future actions should balance durably bringing inflation back to targets and avoiding undue economic contraction; incoming data are critical.
- Central bank independence remains a key anchor for inflation expectations.
- Exchange rates and financial stability:
- Allow exchange rates to absorb shocks when fundamentals move.
- Use the IMF Integrated Policy Framework to guide interventions addressing financial stability risks from disorderly market movements.
- Structural reforms to lift low potential growth:
- Strengthen governance and security.
- Enhance productivity via improved business environment, policy predictability, and reduction of informality.
- Foster greater intraregional trade.
Country and program notes — selected countries
- Ecuador:
- Recent earthquake acknowledged; dialogue with authorities ongoing.
- Discussions are progressing on the second review of the EFF arrangement; no specific review dates announced but staff continue close engagement.
- The RSF was considered by authorities but they have decided to postpone formally requesting it for now; it remains a possibility.
- Staff will factor recent global developments (e.g., lower oil prices) into program assessments.
- Argentina:
- Program was approved by the Executive Board following rigorous evaluation; staff report contains contingency planning and inflation forecasts.
- IMF emphasizes that it does not take positions on political processes; policy continuity to support stability and recovery was highlighted.
- Brazil:
- Authorities are taking measures to stabilize debt and aim to place the debt ratio on a downward path; IMF supports meeting the fiscal rule and primary objectives.
- Central bank has been tightening policy to bring inflation back to target; central bank independence and commitment to targets noted as important anchors.
- Mexico:
- Expected to be more affected by U.S. trade policies; GDP projected to decline slightly this year.
- El Salvador:
- Program: 40-month arrangement with $1.4 billion in IMF financing; total mobilizable resources including other IFIs about $3.5 billion.
- Authorities continue to comply with the program performance criterion of non-accumulation of bitcoin by the overall fiscal sector.
- Program emphasis: structural reforms (governance, transparency), fiscal adjustment, and improvements in security intended to create conditions for stronger private investment and growth.
- Honduras:
- Staff-level agreement reached; staff ready to go to the Board for the second review.
- Improvements: higher reserves, mobilization of resources from other IFIs, lower inflation, faster growth, and fiscal progress — an example of strengthening preparedness.
- Suriname:
- Successfully completed the last review of its program; program began with challenges and ended successfully.
- Guyana:
- Fastest-growing economy globally with average growth rates of 47 percent between 2022 and 2024.
- Continued very fast growth expected in a context of macroeconomic stability.
- Sovereign Wealth Fund buffers about 13 percent of GDP; buffers deemed crucial to mitigate global shocks.
- IMF advice: maintain macro stability, strengthen resilience to oil-price shocks, build strong institutions, and gradually close fiscal deficits to preserve wealth.
- Eastern Caribbean Currency Union (ECCU):
- IMF not worried about the peg; ECCU has a strong reserve-to-money ratio.
- Recommendation: maintain consistent policies to support the peg and macro stability.
Small island states, tariffs, tourism, and climate resilience
- Tariffs and external demand:
- Tariff changes and global cycle are headwinds for Caribbean tourism; reservations typically made in advance and, as yet, large cancellations have not been observed.
- IMF recommendation: prioritize macro stability and rebuilding fiscal space where needed to avoid disorderly macro outcomes.
- Climate change and disaster risk:
- Natural disasters are macro-critical for the Caribbean; financing structures and infrastructure investments to confront extreme weather events are essential.
- Priorities: build fiscal buffers, enhance disaster resilience, strengthen institutions, and pursue intra-regional cooperation to expand capacity and finance.
Fiscal calibration and country-specific fiscal details
- Chile:
- After a slight widening of the fiscal deficit last year, IMF advises decisive return to a downward deficit path.
- Authorities committed to doing this in 2025 and to adhering to the debt ceiling.
- Given the weaker starting position in 2025, smoothing the adjustment is appropriate, but with the new target of 1.5 percent the authorities will need measures of around 0.5 percent to be identified.
- Recent announcements of corrective fiscal actions are welcome; IMF will assess size and timing and stresses policy agility given uncertainty.
Press Briefing Transcript: Western Hemisphere Department, Spring Meetings 2025 — IMF Communications Department, April 26, 2025