International Monetary Fund. Western Hemisphere Dept.
INTERNATIONAL MONETARY FUND
The main focus of this report is the outlook for the region in the face of the downturn now projected for the U.S. economy and the continuing risks that affect the global outlook. Overall the region is better placed than in the past to navigate the current financial turbulence, given reduced vulnerabilities and stronger policy frameworks. Nonetheless, the report points to risks that the global financial stress could curtail capital flows to the region and world commodity prices could fall more than expected. There are also risks arising from rising inflation and rapid private credit growth in a number of countries. The report then explores the policy options facing governments in the region, underscoring the need to preserve the gains of recent years
Financial sector shocks are expected to slow down the U.S. economy, despite substantial policy stimulus in the pipeline. This is projected to slow global growth to 3.7 percent in 2008 from 4.9 percent in 2007. The overall balance of risks to the short-term global outlook is tilted to the downside. Growth in the Latin American and Caribbean (LAC) region has been very buoyant in recent years, partly reflecting the commodity boom. But strong domestic demand coupled with supply shocks have created inflation pressures. The regional outlook is now being clouded by the stresses in global financial markets and the marked downturn projected for the United States. This chapter discusses (1) the U.S. financial shock and weaker outlook, (2) the transmission of global shocks to the LAC region through financial markets, commodity prices, and capital flows, (3) the risks for the LAC growth outlook balanced against ongoing inflation pressures, and (4) policy options for managing these risks in the LAC region.
You are not logged in and do not have access to this content. Please login or, to subscribe to IMF eLibrary, please click here