Press Briefing Transcript: Regional Economic Outlook for the Western Hemisphere, Annual Meetings 2025

IMF News, October 18, 2025

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Published: October 18, 2025

Regional growth and outlook

Growth in Latin America and the Caribbean:
- Projected to remain steady at 2.4 percent in this year 2025.
- Projected to moderate very slightly next year (2026) with risks tilted to the downside.
Global conditions supportive for the region:
- Commodity prices have stabilized after early-year volatility.
- Financial conditions have eased amid declining sovereign spreads.
- A weak U.S. dollar in comparison to last year.
- Regional exports have kept pace with global trends of readily firm trade.
Domestic conditions:
- Labor markets remain robust and generally support private consumption.
- Low exposure of many economies to the U.S. and lower tariffs for the region relative to other regions provide buffers.

Fiscal policy, debt, and consolidation

Current fiscal dynamics:
- Structural primary balances remain lower than anticipated, indicating delays in fiscal consolidation.
- Public debt ratios are rising in the region.
- Insufficient fiscal effort complicates debt sustainability and the effectiveness of monetary policy.
Fiscal policy observations and recommendations:
- Reinforce fiscal frameworks and rebuild fiscal buffers to mitigate risk-premium compression.
- Advance fiscal consolidation to safeguard price stability and increase monetary policy effectiveness.
- Reallocate spending from less productive current expenditures toward growth-enhancing investments (education, health, infrastructure).
- Mobilize additional revenues where taxes-to-GDP ratios are relatively low compared with other regions.
- Address rigidities that limit fiscal maneuverability; some countries exhibit up to 90 percent of the budget being rigid.

Monetary policy and inflation

Inflation and monetary policy stance:
- Inflation remains above target in some countries; inflation expectations are stable but in some cases a bit above targets.
- Robust labor markets and fiscal concerns are slowing disinflation.
- Recent exchange rate appreciation has helped disinflation in some cases.
- Central banks in the region have responded appropriately and remain data-driven.
- Continued caution is warranted where economic slack is not evident and inflation remains above target.
Interaction of fiscal and monetary policy:
- Reforms enhancing central bank independence have supported price stability.
- High public debt and deficits can constrain monetary policy; lowering debt levels makes monetary policy more effective.

Structural constraints and productivity

Long-term potential growth:
- The region’s potential growth remains stuck at historically low levels and lags emerging market peers.
- Contributing factors: slowing labor force expansion, low capital accumulation, and stagnant productivity.
Analytical findings on productivity:
- Firm-level evidence shows persistent resource misallocation and sluggish productivity growth among firms.
- More productive firms face barriers to expand due to safety-based regulations, taxes, financial constraints, and limited competition.
Policy priorities to lift potential growth:
- Reform to reduce resource misallocation and barriers to firm expansion.
- Simplify and streamline permitting and regulatory processes to facilitate investment.
- Increase labor force participation, including of women.
- Improve rule of law and governance; address internal security constraints that deter investment.

Program engagement and country-specific notes

General engagement:
- The IMF remains closely engaged with the region through policy advice, capacity development, and financial support.
Recent program developments:
- Barbados: completed its arrangement under the Extended Fund Facility and the Resilience and Sustainability Facility.
- Costa Rica: a new Flexible Credit Line (FCL) has been launched.
- Colombia: cancelled its FCL.
Brazil:
- IMF has revised up growth for Brazil in recent years; surprises to the upside.
- Primary balance forecasts have changed little since the last round due to data cutoff timing.
- IMF expects the government can find ways to adjust spending and revenues to meet fiscal plans despite a recent overturning in Congress of a tax-raising measure.
- Central Bank’s inflation-targeting regime remains mature; monetary policy response to recent inflation increases has been effective.
Honduras:
- Staff-Level Agreement of the Fourth Review reached recently.
- Remittances are critically important: one question framed remittances as 25 percent of gross domestic product for Honduras.
- The economy has been performing very well with growth firm; coffee prices and remittances have helped this year.
- Program has strengthened buffers and resilience through fiscal and monetary commitments.
Mexico:
- Scope exists for Mexico to increase its share in U.S. markets (nearshoring); exports have held up well and are more diversified (electronics, high-value goods, autos).
- Outcomes depend on how USMCA renegotiation and U.S. trade measures evolve.
- Judicial reform effects on investment are still uncertain; investors currently focus more on trade regime.
Canada:
- IMF view: tariffs affect growth, but Canada can lift internal barriers to internal trade and has fiscal space for investment.
- Recommendation: pursue comprehensive (centralized) removal of internal trade impediments rather than bilateral fixes.
Argentina:
- IMF welcomes U.S. Treasury support (swap) as complementary to the Fund-supported program; coordination between IMF, Argentina, and U.S. Treasury has been deep.
- Fund seeks consistent macroeconomic policies that reduce inflation, accumulate reserves, and create a foundation for sustained growth.
- Reserve accumulation is an objective tied to policy consistency and market stability.
Chile:
- IMF finds Chile’s debt to be sustainable with strong fiscal institutions; Chile qualifies for the FCL.
- IMF supports medium-term fiscal consolidation aimed at getting close to balance by 2029.
- Recommend reforms to improve permitting processes to boost investment and productivity.
Ecuador:
- Staff-Level Agreement reached; program performance remains very strong and August quantitative targets were met.
- IMF staff stand ready to go to the Board to unlock disbursements of about $600 million.
- Authorities’ homegrown program is delivering fiscal progress while increasing support for vulnerable groups.
- Forecasts: IMF noted 3.2 percent growth focus for Ecuador this week; social unrest and other developments will be monitored for downside risk to forecasts.
Bolivia:
- IMF has discussed challenges and policy views with presidential candidates ahead of the election.
- Fund is ready to support Bolivia with technical advice or financing and can move quickly if requested.

Policy recommendations and priorities

Short- to medium-term:
- Reinforce fiscal frameworks and rebuild fiscal buffers to reduce sovereign risk premiums.
- Sequence fiscal consolidation to support price stability while protecting growth-enhancing spending.
- Accumulate reserves where appropriate to stabilize markets and complement program support.
- Central banks should remain data-driven and cautious where inflation remains above target.
Structural and medium-term:
- Implement reforms to raise productivity: reduce resource misallocation, lower administrative and permitting barriers, enhance competition, improve access to finance, and reform tax and regulatory frameworks that impede firm growth.
- Address internal security challenges to encourage investment.
- Mobilize revenues where tax-to-GDP ratios are low and reallocate spending from current to investment priorities (education, health, infrastructure).
- Strengthen governance and rule of law to support private investment and sustained growth.

Press Briefing Transcript: Regional Economic Outlook for the Western Hemisphere, October 17, 2025. IMF Communications Department; speakers: Rodrigo Valdés (Director, Western Hemisphere Department) and Nigel Chalk (Deputy Director, Western Hemisphere Department).