Latin America and the Caribbean will grow by only 1% this year, according to estimates from the Inter-American Development Bank (IDB), which released its macroeconomic report this Sunday, a document prepared before the crisis that erupted after the fall. Silicon Valley Bank US.
At a press conference, the bank’s chief economist, Eric Parrado, acknowledged that the data is “very low” and that it could even fall if the financial crisis spreads, though Latin America it is “solvent and elastic”.
In Latin America and the Caribbean Banking system it was part of the solution, not the problem,” and banks “are more capitalized, more liquid, with low NPLs and resilience to shocks,” he explained.
What is observed, he added, “is a couple of weeks financial nervousness” and “the problem of trust in some banks”, and not something like what happened in 2008 and 2009 with the “subprime” (high-risk) mortgage crisis.
Photo: EFE
Parrado’s message was in line with the president’s statement Inter-American Development Bank (IDB) Ilan Goldfein, who told a press conference before the bank’s meeting in Panama City that the financial system in Latin America is “very resilient.”
And this is also in tune with the IDB report itself, which, despite being prepared before these turbulent days, touches on the main potential risks of financial markets.
In Latin America and the Caribbean, “financial markets remain resilient” and “seem well-prepared for the next turmoil,” as bank profitability is at pre-crisis levels, according to the report. pandemic and capital adequacy ratios “remain above regulatory requirements”.
A paper entitled “Preparing a Macroeconomic Framework for Resuming Growth” was presented at this conference in Panama City, where the 63rd Annual Meeting was held. IsDB Board of Governorswhich ends this Sunday.
According to the Development Bank, the region will grow by 1% in 2023, by 1.9% in 2024, and by 2.3% in 2025. These figures are lower than the forecasts of organizations such as International Monetary Fund (IMF), which in its latest economic outlook report estimated that the region will grow by 1.8% this year and 2.1% in 2024.
“For the development goals of our countries, it is very low, and that is why we are sending a signal that we must make efforts to address issues such as productivity, for job creation and growth,” Parrado said.
too short height
Poor growth in 2023 is associated with lower global growth, higher interest rates, global monetary tightening, gradual fiscal consolidation and existing high level of debtreports IDB.
In fact, IDB warns about “uncertainty high” and paints a negative scenario that could happen if the three existing risks materialize.
First, immunity to covid in China remains relatively low, and new strains could weaken the effectiveness of vaccines, posing a risk to both China and the rest of the world. Also concerned about the possible increase Russian war in Ukraine.
Finally, there is a possibility that the economic performance of the United States will be worse, resulting in lower growth rates, more unemployment and sustained inflation above 2% in the core global economy.
The realization of these risks may lead, IDB warns, to the fact that the region will decline this year to 1.5%. In this downside scenario, Latin America and the Caribbean will also contract by half a point in 2024, before rebounding by 2% in 2025.
Debt and inflation, problems of the region
One of the big challenges for the region is to reduce inflation, especially in relation to food price. It will continue to fall this year until it hits “inflation targets” in 2024, Parrado said.
To this end, he added, it is “very important” that central banks continue to make efforts and continue their efforts to curb inflationincluding rising interest rates.
In Latin America and the Caribbean, inflation was seen primarily in food prices, which rose by 30% between February 2020 and December 2022, with the most direct impact on rising poverty and extreme poverty.
Another major challenge for the region’s economies is to reduce public debt.
“All governments have put in quite a lot of effort to mitigate the effects of the coronavirus and that has had a strong impact on the economy,” Parrado said. For this reason, it is necessary to carry out “fiscal plans” that reach reduce debt.
The IDB report speaks of the “urgent need” for a policy aimed at adjusting the fiscal accounts. Some of his advice is to improve spending and tax collection efficiency, and improve fiscal institutions and the debt structure.
EFE
Source: Aristegui Noticias
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
