MercoPress. South Atlantic News Agency

IMF forecasts 2.6% contraction for Latam economy

The fall in global trade had an unexpected impact on the region

The Latinamerican economy is forecasted to contract 2.6% this year according to the latest estimates from the International Monetary Fund, with Mexico showing the worst performance plummeting 7.3% in 2009.

The latest IMF report which updates April forecasts lowers the region’s forecast 1.1 percentage points “basically because production has been affected far more than originally expected given the deceleration of world trade”.

Mexico’s April estimate is down 3.6 percentage points to a negative 7.3%, the largest contraction in the area while Brazil’s estimate was left unchanged with GDP contracting 1.3% in 2009.

However in spite of the expected fall this year, “the region is benefiting from the increase in commodities’ prices”, points out IMF, which estimates that Latinamerica will expand 2.3% during 2010. This represents a 0.7 percentage increase over the previous estimate.

The Mexican economy is forecasted to expand 3% in 2010, which also represent a review, but upwards from April’s report equivalent to two percentage points.

Brazil in 2010 is expected to expand 2.5%, which is 0.3 percentage points more than in the April report.

The IMF also reviewed upwards in 0.6 percentage points the world’s economy growth for 2010 reaching 2.5%. The report indicates that the world is beginning to abandon recession although recovery is expected to be “probably very mild”.

“The world economy is beginning to move out of a recession unprecedented since the end of World War II, but stabilization is unequal and recovery will probably be very mild”.

As to world trade of goods and services it is expected to drop more than expected in 2009, probably close to 12.2%, but will also recover more than expected in 2010 (1%) said the IMF. However and is spite the worse of the financial crisis could be over, stabilization anticipated in several markets is still insufficient to lower the guard.