The institution estimates that the region will be able to grow 1.9% in 2024, provided that the US avoids a recession this year and global economies manage to lower inflation.
After having exceeded forecasts and growing by 3.9% in 2022, the economies of Latin America and the Caribbean will increase this year by only 1%. This is estimated by a new macroeconomic report published this Sunday by the Inter-American Development Bank (IDB) that was also presented in Panama City within the framework of the annual assembly of the body.
From the institution they estimate that the region will be able to grow 1.9% in 2024as long as the US avoids a recession this year and global economies manage to lower inflation.
“As the world adjusts to the consequences of the overlapping shocks, two risks have appeared on the economic horizon of Latin America and the Caribbean. Policymakers must navigate these waters cautiouslycoordinating the appropriate mix of hunting, fiscal, financial and other relevant economic policies,” stressed Eric Parrado, chief economist at the IDB.
Fight against inflation
On the other hand, the agency recalled that in July of last year the average rate of inflation reached 9.6% in the region, its highest point since the 2008 global financial crisis. Although the index in question has declined in most nations, it remains high “across the region.”
Given this situation, the IDB recommends that these countries continue or even tighten its monetary policies in order to guarantee that in 2024 inflation returns to the targets set by the central banks. In this sense, they emphasized that the efforts to combat the increase in prices will bring about an economic slowdown this year.
Meanwhile, IDB forecasts suggest that sovereign debt could increase “at a fast pace“, for which he calls on the authorities to “adjust the fiscal accounts”. “IDB studies recommend that the governments of the region reduce the public debt ratios to a prudential range of between 46% and 55% of GDP” , says the entity.
“We have much better capitalized banks”
In the press conference that followed the presentation of the report, Parrado tried to inspire optimism regarding the question of whether the banking and financial turmoil in the US and Europe could spread to the region.
“At the moment, we are seeing a couple of weeks of financial nervousness, but it must be considered that this banking crisis of some banks is very different from what we experienced in 2008 and 2009“, he stressed, quoted by the newspaper La Jornada. In this sense, he explained that at that time the crisis was caused by high-risk mortgages, while now it is about” a crisis of confidence in some banks“.
In addition, he stressed that in Latin America and the Caribbean the banking system “has been part of the solution and not part of the problem.” “We have much better capitalized banks, they are much more liquid and the delinquency rates are much lower,” he remarked. In this sense, he believes that the region’s banking system has “resilience” to deal with the current shock.
Source: RT
