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World Bank cuts its Latin America growth forecast


The World Bank roughly halved its economic growth forecast for Latin America this year on a tougher global environment and Venezuela’s downward spiral.

The bank said Latin America and the Caribbean would expand 0.9 percent this year, down from the bank’s October last year forecast of 1.6 percent growth.

The estimates include a 25 percent GDP plunge in Venezuela that is triple the prior outlook and a lower forecast for Mexico that reflects policy uncertainty.

“Prospects for this year show no real improvement over 2018, as a result of weak or negative growth in the three largest economies in the region — Brazil, Mexico and Argentina — and a total collapse in Venezuela,” according to a report titled: When Dreams Meet Reality.

“The sharp drop in commodity prices — especially oil and copper — during the last months of 2018 and the deceleration of Chinese growth may turn into significant headwinds,” it said.

Latin America has struggled to return to the levels of expansion seen during the boom years of soaring commodity prices.

While signs that the US Federal Reserve would not raise its key interest rate again until next year would provide “a breather” to the region, a trend toward higher borrowing costs globally could prompt regional governments to keep monetary policy tight at the expense of growth, the report said.

In Latin America’s second-largest economy, Mexican President Andres Manuel Lopez Obrador has sent mixed signals about policymaking.

For example, he rattled financial markets by putting energy reforms on hold, but subsequently submitted a “relatively prudent” fiscal budget.

“Only time will tell which orientation will prevail,” the report said. “In the meantime, economic policy uncertainty is likely to force the central bank to maintain a tight monetary policy, which will hurt growth.”

Meanwhile, Venezuela’s economic catastrophe would see inflation reach 10 million percent this year, while the number of migrants who have fled the nation surpasses 5 million, according to the report.

Likewise, the World Bank cited unofficial sources indicating poverty reached 90 percent of the nation’s population.

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