IMF believes that “riots and political paralysis” will harm the Latin American economy

The International Monetary Fund (IMF) warned this Wednesday, February 1 that The riots and political paralysis that are being experienced in different regions of Latin America could have consequences for the economic activity and growth of the continent.

“The continued possibility of unrest and political paralysis has the potential to erode confidence and weigh on economic activity,” the Fund said in an article written by analysts Gustavo Adler, Nigel Chalk and Anna Ivanova.

Although it does not mention any of the political crises that have been experienced in recent weeks in countries like Brazil or Peru, the IMF explains that the growing social discontent and the decline in confidence in public institutions have been an important trend in the region since some time ago.

“Social tensions were certainly exacerbated during the pandemic. The poorest people, particularly those working in face-to-face services, bore the brunt of the economic fallout. While government support helped, many could not completely insulate themselves from the negative impact, as evidenced by the marked increase in poverty”is specified in the article.

The IMF analysts explain that, despite the fact that in 2022 the region’s economy expanded by almost 3.9%, inflation fell and employment recovered strongly, “2023 is likely to be a challenging year for the region “.

This week, the agency published its latest global growth forecasts and noted that Latin America and the Caribbean will grow 1.8%, below the global average of 2.9%. Also in 2024, when it will grow 2.1%, compared to the 3.1% world average.

All this will be due, among other reasons, to higher interest rates, the fall in the prices of raw materials, slowing job creation, weakening consumer confidence and the slower growth of its trading partners, particularly the United States and the euro zone.

On managing inflation

The IMF also mentions that central banks should not reduce their determination to lower inflation and that fiscal policy should emphasize social spending to support the poor while reducing public debt.

“Achieving these targets will require revenue mobilization in a progressive, growth-friendly and equitable manner. Trust in government will continue to be undermined as long as the wealthy do not pay their fair share in taxes,” the article said.

As for inflation, after registering 7.9% in 2022 (excluding the volatile Argentina and Venezuela), in 2023 the IMF estimates that it will stand at an average of 5.2% in the region and in 2024 at 3 ,4%.

With information from EFE.