January 19th, 2016 (ICR News) The International Monetary Fund predicted on Tuesday that Latin America’s economy will contract by -0.3 percent in 2016 and has also lowered its global economic growth forecast for this year.
In terms of Latin America, the forecast represents a significant downward revision compared to the IMF’s projections in October, when it forecast that Latin America would see the beginning of recovery and positive growth of 0.8 percent.
The outlook for Latin America is heavily influenced by the recession in Brazil, whose economy the IMF predicts will contract sharply by -3.5 percent this year. Brazil witnessed inflation of 10.67 percent in 2015, its highest level since 2002.
Outlook for global economy also downgraded
The IMF also lowered its global economic growth forecasts for 2016, citing risks to emerging markets due to a slowing Chinese economy.
The Washington-based IMF said Tuesday it believes the world economy will grow 3.4 percent in 2016 and 3.6 percent in 2017, two-tenths of a percentage point lower than previous estimates.
The IMF is maintaining its prediction that China’s economy will grow 6.3 percent this year, then slow to 6.0 percent in 2017, as Beijing struggles to move from an investment and export-driven economy to one driven by consumer demand.
Global markets have been rocked during the first three weeks of 2016 due to worries over China’s economic slowdown and ever-falling oil prices.
“The coming year is going to be a year of great challenges,” says IMF economist Maurice Obstfeld.
The IMF is predicting the U.S. economy will grow 2.6 percent for both 2016 and 2017, down 0.2 percent from its October forecast, the result of a strong U.S. dollar which is causing the nation’s manufacturing sector to shrink.