Regional Economic Outlook: Western Hemisphere, October 2023
Regional Economic Outlook, October 2023
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- Published: October 13, 2023
Latin America and the Caribbean: Recent Developments and Outlook
- 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,
- the timely withdrawal of pandemic-related fiscal stimulus takes effect, and
- the external environment is weakening.
- The early and swift monetary tightening across the region since 2021, together with the withdrawal of most of the pandemic fiscal stimulus and the reversal of external price pressures, have helped put headline inflation on a downward trajectory.
- Core inflation has also started to ease, as price pressures are becoming less generalized, although it remains elevated amid strong labor markets and positive output gaps in some countries.
Banking, Credit, and Financial Conditions
- Banking systems have weathered the rise in interest rates well and are generally healthy.
- Credit to the private sector is decelerating amid tighter supply conditions and weaker demand.
Key Analytical Findings from Background Papers
- Income Volatility and Social Insurance in Latin America:
- Historically, Latin America has been a volatile region, with aggregate income volatility higher than in other emerging economies and twice as high as in advanced economies.
- Large income swings can disrupt household consumption and investment decisions, push individuals into poverty, and lead to social unrest.
- The paper documents the level and evolution of income volatility in Latin America and the role of social insurance in mitigating this volatility.
- Trade Integration and Implications of Global Fragmentation for Latin America:
- Countries in Latin America and the Caribbean (LAC) trade substantially less than those in other emerging market and developing economies.
- Poor infrastructure is an important impediment to trade and closing the infrastructure gap can yield sizable trade and output gains.
- LAC is well placed to withstand a mild scenario of global trade tensions (fragmentation) in which trade barriers are erected only among large economies, although output losses could be sizable in more extreme scenarios.
- Reducing trade barriers, closing infrastructure gaps, and putting in place policies that make LAC an attractive investment destination could pay a double dividend of boosting trade and growth in the region and mitigating the risks from global fragmentation.
Additional Thematic Annexes (topics covered)
- Banking in a High-Interest-Rate Environment in Latin America
- El Niño’s Potential Impact on Latin America
- Climate Shocks and Cross-Border Migration in Latin America and the Caribbean
- Crime and its Macroeconomic Consequences in Latin America and the Caribbean
- Debt-for-Nature Swaps in Latin America and the Caribbean
International Monetary Fund, Regional Economic Outlook: Western Hemisphere, October 2023
Content in this bundle
- October 2023 WHD REO Background Paper 1
- October 2023 WHD REO Background Paper 2
- Online Annex 1. Banking in a High-Interest-Rate Environment in Latin America
- Online Annex 2. El Niño’s Potential Impact on Latin America
- Online Annex 3. Climate Shocks and Cross-Border Migration in Latin America and the Caribbean
- Online Annex 4. Crime and its Macroeconomic Consequences in Latin America and the Caribbean
- Online Annex 5. Debt-for-Nature Swaps in Latin America and the Caribbean
- Presentation: Securing Low Inflation and Nurturing Potential Growth
- Full Report
- Anexo On-line 3. Choques climáticos e migração transfronteiriça na América Latina e no Caribe
- Anexo On-line 4. A criminalidade e suas consequências macroeconômicas na América Latina e no Caribe
- Anexo On-line 4. A criminalidade e suas consequências macroeconômicas na América Latina e no Caribe