World Bank sees improved Latin America and Caribbean growth
Latin America and Caribbean decisively outperformed many other regions during the 2008-2009 recession.
WASHINGTON DC, United States, Friday April 15, 2011 - The economic growth of Latin America and the Caribbean (LAC) outpaced the growth rates of Eastern Europe and Central Asia and the rate of high-income countries by more than three percentage points, according to the World Bank.
A new report entitled “Latin America and the Caribbean’s Success Put to the Test” prepared by the World Bank’s economic office for the region put the growth rate for the LAC region at about 6 percent in 2010.
According to the report, not only did the LAC weather the 2008-2009 recession much better than it had previous downturns, but the region also decisively outperformed many other regions during the same period, with a decline in growth smaller than that of the middle-income country average, and with a rebound that was swifter and stronger.
However, the report acknowledged the fact that post-crisis growth performance has been uneven within the region.
“Several South American countries — most notably Argentina, Brazil, Peru, Paraguay, and Uruguay— have registered a remarkably vigorous recovery with growth rates that exceeded 7.5 % in 2010. In contrast, economic activity in many countries in Central America and the Caribbean, and particularly the English-speaking nations of the Caribbean, expanded at rates in the 1 to 3%range. Negative growth rates were registered for very few countries in the region, notably Jamaica (-0.1%), Venezuela (-1.4%), and Haiti (-8.5%),” stated a press release issued by the World Bank on Wednesday.
And the region is in good company for a trailblazing future given that, as a whole, its gross domestic product (GDP) is forecast to be in the 4 to 5 %range in 2011, a rate similar to that expected of the East Asian Tigers. Inflation rates this year are also expected to remain below two digits at around 6 to 7%.
The report, prepared for the World Bank and IMF’s Spring Meetings, also explores in greater detail the nature of the recovery in Latin American countries in contrast with past performance and that of other middle-income countries.
Top among those differences were:
• A strong public and private consumption. Aggregate domestic demand has outpaced GDP in the post-crisis, just as net exports have been declining.
• Not a credit-less recovery. Mortgage credit in Argentina, Brazil, Chile, Colombia, Mexico, and Peru remained strong during the depths of the crisis and accelerated significantly during 2010.
• Not a jobless rebound. In Argentina, Brazil, Ecuador, Peru, and Uruguay unemployment has already reached lower rates than those prevailing before the downturn.
• Strong currency appreciation pressures. The real effective exchange rate of the larger countries in the region appreciated by a cumulative 18 percent between its lowest levels reached around March 2009 and December 2010.
While calling the region’s recovery “vigorous and exemplary”, the World Bank cautioned that this would not necessarily mean “smooth sailing ahead” as external and internal risks loomed large, and those countries recovering more robustly faced conflicting policy challenges.
The economic division of the financial institution noted that, externally, the region’s prospects were dependent on the pace of recovery in advanced economies and the surge in commodity prices; while internally, the combined challenges of inflation, local currency appreciation, and the prospects of economic overheating, could create a struggle to find the right balance.
“These complexities raise the premium on skillful policy,” said the Bank’s Chief Economist for Latin America and the Caribbean, Augusto de la Torre. “Contrary to popular perception, the quality of macro-financial policy is being more subtly and perhaps more severely tested in the midst of the current buoyant juncture.”
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