MercoPress. South Atlantic News Agency

IMF forecasts “volatile inflation and elastic recovery”

Inflation in Latinamerica will probably remain volatile as a consequence of changes in commodities prices, said Wednesday the International Monetary Fund in its annual World Economic Outlook. Nevertheless IMF estimates Latinamerica will expand 4,1% this year and forecasts 3,8% in 2006.

"Prospects are that the current expansion will be more elastic than previous ones", indicates the half year report, adding that the "the Latinamerican economic thrust rides mainly on the back of solid exports of commodities".

Among the risks for the next twelve months the IMF report mentions a slower United States growth, strong surge in international interest rates and higher oil prices. However IMF estimates that Latinamerica recovery will be more resistant and solid than in the past, even when it has moderated from the 5,6% of 2004, the highest since 1980, and should be above the average of the nineties.

More specifically regarding different countries, the IMF report says Argentina should tighten its monetary policy so as to dilute a surge in inflation, but nevertheless increased its forecast growth for Argentina both in 2005 and 2006.

IMF estimates Chile's economy will expand 5,9% in 2005 (down from 6,1%) and 5,8% in 2006 (up from 5,4%).

"Economy activity in Chile continues to expand at a robust pace supported by favourable conditions for exports and a surge in investment. Inflation has remained in the target range (2 to 4%), although the underlying index has began to climb but the Central Bank has tightened monetary policy (increasing the basic rate four times since April from 3 to 4%)" indicates the report.

Besides President Ricardo Lagos administration continues to adhere to budget structural surplus policy, which with favourable economic conditions will enable Chile to end 2005 with a 3% GDP fiscal surplus.