Latin America will continue on its growth track and the regional economy should expand 4.3% in 2006 according to the International Monetary Fund (IMF) Economic Outlook released Wednesday, April 19.
The growth projection for the region’s real GDP was half a point higher than the IMF initial forecast mainly because of improved performances in Argentina and Venezuela.
"Many countries benefited from the strong global demand for commodities – in particular, fuels and metals (Chile and the Andean region) and agriculture (Argentina and Uruguay)," according to the IMF.
"A major achievement in the region has been the decline in public debt on account of impressive fiscal discipline and the recent strong growth performance," adds the World Economic Outlook, which forecasts the region will continue to grow in inflation adjusted terms.
The IMF is also forecasting regional real GDP growth of 3.6% in 2007, slightly up from the previous September estimate.
Top performers in the region this year are expected to be Argentina, with real GDP growth of 7.3%, and Venezuela’s 6%. However, the IMF expects growth in both countries to slow in 2007, with Argentina’s GDP expanding 4% and Venezuela’s 3%.
Brazil is expected to post real GDP growth of 3.5% both this year and in 2007, while Mexico’s economy is projected to expand 3.5% in 2006 and 3.1% next year.
IMF forecasts Chile’s economy will expand 5.5% in 2006, down from the original 5.8% estimate, and in 2007, 5.2%. In 2004 Chile’s growth was 6.1% and in 2005, 6.3%.
The report states that in spite of a slowing down in the third quarter of 2005 the Chilean economy is expected to show a sustained advance during 2006.
However efforts to improve productivity will be vital "to reduce the Chilean economy dependency on international copper prices" and the IMF proposes a greater flexibility in the labor market and more investment in research and development to sustain manufacturing at competitive levels.
Overall the IMF warns that "an important challenge for the region will be to achieve an appropriately balanced response to the likelihood of further upward pressures on exchange rates if the global environment remains supportive of continued strong external performance by Latin America."
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