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

_IMF News, October 18, 2025_

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## Bibliographic details
- Published: October 18, 2025

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### 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).*

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