St. John’s Antigua- The International Monetary Fund (IMF) is reporting a “surprising upside” coming out of its recently released World Economic and Financial Survey 2012.
According to the Washington-based multilateral institution, growth prospects for Latin America and the Caribbean have moved up by a quarter percentage point compared with the forecasts presented in the April 2012 World Economic Outlook.
The growth projections for Latin America and the Caribbean in April 2012 stood at 3.4 per cent for 2012 and 4.2 per cent for 2013, but now, the new projections from the IMF state that growth for the region stands at 3.5 per cent for 2012 and 5.1 per cent for 2013.
The IMF did acknowledge that the upward movement was partly due to temporary factors, among them easing financial conditions and recovering confidence in response to the European Central Bank’s (ECB’s) longer-term refinancing operations (LTROs).
According to the report on the IMF survey released on July 16, global growth has increased to 3.6 per cent (seasonally adjusted annual rate) in the first quarter of 2012.
However, growth in a number of major emerging market economies has been lower than forecast. Partly because of a somewhat better-than-expected first quarter, the revised baseline projections in this WEO update suggest that these developments will only result in a minor setback to the global outlook, with global growth at 3.5 per cent in 2012 and 3.9 per cent in 2013, marginally lower than in the April 2012 World Economic Outlook, the report stated.
These forecasts, according to the IMF, clearly show that downside risks continue to reflect risks of delayed or insufficient policy action. Pointing out that measures announced at the European Union (EU) leaders’ summit in June are steps in the right direction, the IMF has warned that a timely implementation of these measures, together with further progress on banking and fiscal union, must be a priority.
The IMF stated that its projections assume that financial conditions that policymakers will follow up on the positive decisions agreed upon at the June EU leaders’ summit and will take action as needed if conditions deteriorate further.
In the near term, the IMF analysis reflected, activity in many emerging market economies is expected to be supported by the policy easing that began in late 2011 or early 2012 and, in net fuel importers, by lower oil prices, depending on the extent of the pass-through to domestic retail prices.
Global consumer price inflation is projected to ease as demand softens and commodity prices recede. Overall, headline inflation is expected to slip from 4.5 per cent in the last quarter of 2011 to 3–3.5 per cent in 2012–13.
Among low-income countries, those dependent on aid face risks of lower-than-expected budget support from advanced economies, while commodity exporters are vulnerable to further erosion of commodity prices.
However, on the positive side, the IMF noted that oil price risks have abated in recent months, reflecting the interaction of changes in prospective market conditions and perceived geopolitical risks.
Supply conditions have improved due to increased production in Saudi Arabia and other key exporters, while demand prospects have weakened and are subject to downside risks. With geopolitical risks to oil supply widely perceived to have declined, risks to oil price projections appear more evenly balanced now, while those around prices of non-oil commodities tilt downward, the IMF report stated.