WASHINGTON, CMC—The Worldwide Financial Fund (IMF) stated on Tuesday that financial development in Latin America and the Caribbean (LAC) is projected to average from 2.4 p.c in 2024 to 2 p.c this 12 months earlier than rebounding to 2.4 p.c in 2026.
The IMF has launched its World Financial Outlook (WEO) forecast, revising downward by 0.5 proportion factors for 2025 and 0.3 proportion factors in 2026 in contrast with the January 2025 WEO.
The figures have been launched right here through the IMF’s Spring Conferences, which happened on Friday in opposition to the backdrop of the commerce tariff introduced by United States President Donald Trump in February and expanded in April.
The revisions in Latin America and the Caribbean largely replicate a big downgrade to development in Mexico, by 1.7 proportion factors for 2025 and 0.6 proportion factors for 2026.
That is decrease than the projections within the January 2025 WEO Replace by 0.5 proportion factors for 2025 and 0.3 proportion factors for 2026, with downward revisions for almost all nations.
The downgrades are broad-based throughout nations and largely replicate the direct results of the brand new commerce measures and their oblique results by commerce linkage spillovers, heightened uncertainty, and deteriorating sentiment.
This displays weaker-than-expected exercise in late 2024 and early 2025, the impression of tariffs imposed by the USA, the related uncertainty and geopolitical tensions, and a tightening of financing situations.
Financial Counsellor and Director of the IMF’s Analysis Division, Pierre-Olivier Gourinchas, instructed a information convention coinciding with the discharge of the WEO that the IMF’s suggestions name for prudence and improved collaboration.
“First, the plain precedence is to revive commerce coverage stability. The worldwide financial system wants a clear, secure, and predictable buying and selling setting that addresses long-standing gaps in worldwide buying and selling guidelines.”
He stated financial coverage should stay agile and reply by tightening the place inflation pressures re-emerge whereas easing, the place weak demand dominates.
“Financial coverage credibility shall be key, particularly the place inflation expectations would possibly de-anchor, and central financial institution independence stays a cornerstone,” Gourinchas stated, noting that many fiscal authorities will face new spending must bolster protection spending or to offset the commerce dislocations prone to come.
“A number of the poorest nations additionally hit with lowered official support may expertise debt misery. But debt ranges are nonetheless elevated, and most nations have to rebuild fiscal house by implementing structural reforms.
“Help, the place wanted, ought to stay narrowly focused and short-term. It’s simpler to activate the fiscal cap than to show it off. The place new spending wants are everlasting, reminiscent of protection spending in some nations, planning for offsetting cuts elsewhere or new revenues must be made.”
Gourinchas stated that whereas a few of the grievances in opposition to the buying and selling system have benefit, “we must always all work in direction of fixing the system in order that it delivers higher alternatives for all.”
He stated the panorama has modified for the reason that final WEO replace in January: “We’re getting into a brand new period as the worldwide financial system that has operated for the final 80 years is being reset.”
He famous that since late January, many tariff bulletins have been made, culminating on April 2, with near-universal levies from the USA and counter-responses from buying and selling companions.
“The US efficient tariff charge has surged previous ranges over 100 years in the past. Tariff charges on the US have additionally elevated,” Gourinchas stated, including that the surge in coverage and uncertainty is a significant driver of the financial system past the abrupt improve in tariffs.
He stated that if sustained, growing commerce tensions and uncertainty will considerably gradual world development. Reflecting this complexity, the WEO presents a reference forecast that comes with coverage bulletins by the US and buying and selling companions as much as April 4.
“Beneath these reference forecasts, world development will attain 2.8 p.c this 12 months and three p.c subsequent 12 months, a cumulative downgrade of about 0.8 proportion factors relative to our January 2025 WEO replace.”
Gourinchas stated the WEO additionally presents a variety of forecasts primarily based on totally different coverage assumptions.
“Beneath an alternate path that excludes the April tariff bulletins, world development would have seen solely a modest downgrade to three.2 p.c this 12 months.”
He stated the IMF additionally used a model-based forecast to include the short-term suspension of most tariffs introduced on April 9 and the rise in bilateral tariffs between China and the US to prohibitive ranges.
“This pause, even when prolonged completely, delivers the same development outlook as a referenced forecast, 2.8 p.c, even when some high-tariffed nations may benefit.”
Gourinchas stated that whereas world development stays effectively above recession ranges, all areas are negatively impacted this 12 months and subsequent. The worldwide disinflation course of continues, however at a slower tempo, with inflation revised up by 0.1 proportion factors in each years.
“These commerce tensions will drastically impression world commerce. We mission that world commerce development shall be greater than minimize in half, from 3.8 p.c final 12 months to 1.7 p.c this 12 months.”
He famous that the tariffs will play out in another way in several nations, including that for the USA, they signify a provide shock that completely reduces productiveness and output and briefly will increase worth strain.
“This provides to an already weakening outlook and leads us to revise development by 0.9 proportion factors to 1.8 p.c with a 0.4 proportion level downward from the tariffs solely, whereas inflation is revised upwards.
“For buying and selling companions, tariffs act principally as a destructive exterior demand shock, weakening exercise and costs, even when some nations may benefit from commerce diversion. That is why we’ve lowered our China development forecast this 12 months to 4 p.c when inflation is revised down by 0.8 proportion factors, growing deflationary pressures.”
The report stated the worldwide financial system is at “a crucial juncture,” including that indicators of stabilization emerged by a lot of 2024 after a chronic and difficult interval of unprecedented shocks.
“Inflation, down from multi-decade highs, adopted a gradual, bumpy decline towards central financial institution targets. Labor markets normalized, with unemployment and emptiness charges returning to pre-pandemic ranges. Development hovered round 3 p.c up to now few years, and world output got here near potential.”
The WEO, nevertheless, stated main coverage shifts are resetting the worldwide commerce system and creating uncertainty that’s as soon as once more testing the resilience of the worldwide financial system.
Gourinchas stated all nations are negatively affected by the surge in commerce coverage and uncertainty as companies minimize purchases and investments whereas monetary establishments reassess their debtors’ publicity.
“Uncertainty additionally will increase due to the complicated sectoral disruptions that tariffs may trigger, up and down provide chains, as we noticed through the pandemic.”
The impact of those shocks on alternate charges is complicated because the tariffs may recognize the US greenback, as in earlier episodes.
Nevertheless, higher coverage uncertainty, decrease US development prospects, and an adjustment within the world demand for greenback property are weighing down on the greenback.
“Dangers to the worldwide financial system have elevated and are agency to the draw back,” Gourinchas stated, including that whereas the IMF was not projecting a world downturn, the dangers which will occur this 12 months have elevated considerably from 17 p.c again in October to 30 p.c now.
“An escalation of commerce tensions would additional depress development. Monetary situations may additionally tighten as markets react negatively to diminished development prospects and elevated uncertainty. Conversely, development prospects may instantly enhance if nations ease their present commerce coverage stance and promote a brand new, clear, and secure commerce setting,” Gourinchas stated.
He stated addressing home imbalances can even assist increase development whereas contributing considerably to closing exterior imbalances.
“For Europe, this implies spending extra on public infrastructure to speed up collectivity development for China. It means boosting assist for home demand, whereas for the US, it means stepping up fiscal session.”
WEO stated that globally, tariffs’ short-term development impression varies throughout nations, relying on commerce relationships, business compositions, coverage responses, and alternatives for commerce diversification.
“Fiscal assist in some instances (for instance, China, Europe) offsets a few of the destructive development impacts,” the WEO stated.
