MercoPress. South Atlantic News Agency

IMF lowers Latam growth forecasts: declining exports and domestic constraints

”These worse prospects are in turn affecting confidence, demand, and growth today,” said Olivier Blanchard, head of the IMF’s Research Department

The International Monetary Fund cut its global economic growth forecasts for the third time this year, warning of weaker growth in core Euro zone countries, Japan and big emerging markets like Brazil.

In its flagship World Economic Outlook report, the Washington-based body cut its expectations for global growth to 3.3% this year and 3.8% next year. The IMF in July had expected economic growth of 3.4% in 2014 and 4% in 2015.

About Latin America, the IMF said the growth rate is forecast to decrease by half this year, to around 1.3%, due to declining exports as well as domestic constraints. Growth is expected to rebound to around 2.2% in 2015.

The October WEO emphasizes the increase in downside risks—both in the short and medium term—that could dent global confidence and growth.

The scope for emerging market economies to use macroeconomic policies to support growth varies and is more limited in countries with external vulnerabilities. At the same time, emerging markets will need to deal with monetary policy normalization in the United States and possible shifts in financial market sentiment, the report said.

Potential growth rates—that is, the pace at which annual output can expand without pushing up inflation—are also being revised down. “These worse prospects are in turn affecting confidence, demand, and growth today,” Olivier Blanchard, Economic Counselor and head of the IMF’s Research Department, affirmed.

“The challenge for both advanced and emerging market economies, is to go beyond the general mantra of ‘structural reforms,’ to identify which reforms are most needed, which reforms are politically feasible,” he said.

More generally, Blanchard added, policymakers need to “reestablish confidence through clear plans to deal with both the legacies of the crisis and the challenge of low potential growth.”