NEW YORK: A sharp decline in IMF estimates for Latin American economic growth in 2019 largely resulted from “temporary factors” including adverse weather, while policy uncertainty in the largest economies also weighed.

Alejandro Werner, director of the IMF’s Western Hemisphere department, wrote on Monday that output suffered as weather reduced mining output in Chile and agricultural output in Paraguay, while mining activity in Brazil slowed after a dam disaster.

An under-execution of the budget, labor strikes, and fuel shortages dragged Mexico’s economic growth lower, Werner wrote.

Last week, the IMF slashed its 2019 economic growth expectation for Latin America by more than half to 0.6 per cent, from its 1.4pc increase estimate just three months earlier.

Brazil, now expected to grow only 0.8pc from 2.1pc three months ago, is seen accelerating to 2.4pc in 2020, “assuming a robust pension reform is approved, confidence returns, investment recovers, and monetary policy remains accommodative,” according to Werner.

Mexico, seen now growing 0.9pc this year from 1.6pc percent in the previous estimate, is expected to accelerate to 1.9pc in 2020 “as conditions normalize.” The IMF said it is key for Mexico to stick to its fiscal deficit target in 2019 and pass a “prudent” budget for next year.

Argentina’s 2019 economic contraction is seen slightly deeper at -1.3pc from -1.2pc, but the sharper cut came in the 2020 estimate, which fell to 1.1pc from 2.2pc.

“With inflation proving to be more persistent, real interest rates will need to remain higher for longer, resulting in a downward revision to GDP growth in 2020,” Werner wrote about Argentina.

The IMF said last week that as a region it expected Latin America to grow 2.3pc in 2020, compared with the 2.4pc estimated in April.

Published in Dawn, July 30th, 2019