IMF on financial challenges Caribbean will face

IMF financial Caribbean
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IMF on financial challenges Caribbean will face

The International Monetary Fund (IMF) says the economies of Latin America and the Caribbean have continued their strong post-pandemic rebound, but “the winds are shifting” as international financial conditions tighten, commodity prices reverse upward trend and inflationary pressures persist. 

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The Washington-based financial institution on Wednesday said that the reopening of contact-intensive sectors, especially hospitality and travel, the unwinding of pandemic “pent-up” demand and still favourable external financial conditions, supported a solid expansion in the first half of the year, allow services to “catch up” with manufacturing and employment to reach pre-pandemic levels. 

The bank said year-on-year growth reached 2.8 percent in the first quarter, compared to an average of 1.7 percent in the years preceding the pandemic, and that high-frequency indicators point to continued momentum in the second quarter. 

On the back of this “solid” first half of the year, and despite an expected slowdown in the second half, the IMF forecasted the region to grow by 3.0 percent this year, an upgrade from its April forecast of 2.5 percent. 

But it said the region faces “significant challenges”, including tightening international financial conditions, lower world growth, persistent inflation, and increasing social tensions amid growing food and energy insecurity. 

“These factors contribute to our downgrade in growth to 2.0 percent in 2023, 0.5 percentage point lower than anticipated in April,” the IMF said.

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It said the strength of the post-pandemic recoveries has varied across the region. 

The IMF said the global rebound of commodity prices from the pandemic lows, further boosted by the war in Ukraine, has generally supported the recovery of commodity exporters (some South American economies), while constraining those that depend more on commodity imports (Central America and tourism-dependent Caribbean economies). 

“The upward trend of commodity prices seems to be reversing, as the global financial conditions tighten,” the bank said. 

It said among the largest economies, Chile and Colombia have seen a particularly “dynamic rebound, propelled by strong growth in services, in part due to the fiscal stimulus in late 2021, while Mexico’s economic output is yet to regain its pre-pandemic level as services and construction continue lagging.” 

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The IMF said Caribbean economies are also “behind in their recovery, as tourism is yet to return to pre-pandemic levels, despite the recent rebound.”

IMF says shifting global winds pose challenges for Caribbean  Jamaica Gleaner

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