Latin America's recovery from crisis is within reach, says IMF

Oct 1, 2009, 11:21 GMT

Istanbul - Latin America is on the verge of a recovery after a devastating global economic crisis that had its roots in the United States, the International Monetary Fund said Thursday.

But the turnaround has been uneven: Brazil is leading the way, while Mexico will recover more slowly because of its dependence on US demand.

In its semi-annual World Economic Outlook, the IMF revised upwards its forecasts for growth on the entire continent. Latin America will grow by 2.9 per cent in 2010, the IMF said after a July prediction of 2.3 per cent.

The uptick comes after a turbulent year. Latin America's economy will shrink by 2.5 per cent over the course of 2009, mainly because of sharp contractions in the first half of the year.

But the IMF said things could have been much worse. For the first time, governments found themselves able to boost public spending in order to weather the downturn. Weak finances did not allow for 'counter-cyclical' policies in past crises.

'Certainly Latin America has come through this crisis much better that it did through previous crises,' said IMF economist Jorg Decressin.

Brazil was 'leading the recovery,' said Decressin. Its economy is projected to grow by 3.5 per cent in 2010 after only a slight contraction of 0.7 per cent in 2009.

Mexico's economy, by contrast, will shrink 7.3 per cent in 2009. But it, too, will recover to a growth rate of 3.3 per cent next year, the IMF said.

Decressin said Latin America's continuing recovery will be aided by higher commodity prices and improving external demand as the global economy recovers.

The IMF said the world economy will shrink 1.1 per cent this year before growing 3.1 per cent in 2010 - up from a July forecast of 2.5 per cent for 2010.