Latin American economies will experience a slowdown over the next two years, especially due to lower expansion capacity in Argentina and Venezuela, while Brazil should maintain a practically stable performance, the World Bank (WB) said today.
In its annual report on world economic forecasts, the institution stated that the region will end this year with growth of 5%, two tenths above what was predicted by the International Monetary Fund (IMF) in September.
According to the BM, the index, high for Latin American historical parameters, will decrease to 4.2% in 2007 and 4% in 2008. The rates continue to be below the average for developing countries, which are expected to grow 7% this year, 6 .4% in 2007 and 6.1% in 2008.
The IMF, whose forecast for 2007 coincides with that of the World Bank, has not released figures for 2008.
The main cause of the slowdown in Latin America is the moderation of growth in Argentina and Venezuela.
There will also be slowdowns in Mexico, Peru and Colombia, although to a lesser extent. On the other hand, Chile will recover, and in Brazil and Bolivia, the economic pace will remain stable.
The report explains that the region has benefited from a favorable international outlook, but states that conditions will change.
The slowdown will be felt especially in Argentina and Venezuela, countries that reacted vigorously to recent crises, but whose “extremely high” growth rates are “unsustainable”, analyzed the World Bank.
This year, the increase in Argentina’s Gross Domestic Product (GDP) will be 7.6%, but this index is expected to fall to 5.6% in 2007 and 4% in 2008, due to the predictable rise in interest rates and a slowdown in investment. due to high production costs, according to the World Bank.
Venezuela will go from growing 8.5% this year to 6% in 2007 and 5.5% in 2008.
The Dominican Republic, although it overcame its crisis strongly in 2003, is another country with worrying inflation.
In Mexico, growth will fall from the 4.5% forecast for this year to 3.5% in 2007 and 2008, as a consequence of the decline in demand in the United States, whose economy is in the process of slowing down.
Brazil will be the least affected by the cooling in the United States, because it exports more to Asia, which will continue with its stratospheric growth rates.
Furthermore, a predictable reduction in interest rates in the country should lead to an increase in investment in 2007, according to the World Bank.
The organization predicts that the country’s GDP will grow 3.5% this year, 3.4% in 2007 and 3.8% in 2008.
Diário Económico – December 13, 2006