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IMF spotlights uneven global growth
BUENOS AIRES, July 19, 2018 (BSS/Xinhua) – A recent report by the
International Monetary Fund (IMF) warned of uneven economic growth around the
world and rising tensions in trade.
Xinhua spoke with noted Argentine economist Jorge Marchini, vice president
of the Foundation for Latin American Integration (FILA), about the IMF’s
latest “World Economic Outlook Update” released on Monday.
“There is unevenness in the effects of growth. One (region) is the United
States, which has growth and impetus, the other is Europe, which is in
neutral. The Asiatic drive is important and in Latin America, (growth) is
negative,” said Marchini.
The IMF forecast global economic growth for this year and the next to
register 3.9 percent, but not across the board, with gross domestic product
(GDP) contracting in some regions and expanding in others.
For Latin America, the IMF downgraded its growth forecast from 2 percent
to 1.6 percent, mainly due to sluggish growth in Brazil and Mexico, the
region’s No. 1 and No. 2 economies, and the financial crisis gripping its
third-biggest economy, Argentina.
High inflation, a volatile currency and a huge public deficit led
Argentina’s government to recently apply for a 50-billion-U.S.-dollar loan
from the IMF.
Marchini blamed uneven expansion on the current interrelated dynamics of
trade, which leads to ripple effects.
“The world today opens pathways to economic growth for some countries, but
at the same time that tends to cause an imbalance in the global economy,” he
said.
As an example, he noted the United States, whose economy shows signs of
recovery, is increasingly applying protectionist measures that impact other
economies, especially in nearby Latin America.
“There is an international climate with many unknowns and fears, which
sparks protectionism in the global economy and successive tensions between
the United States and China and Europe, with repercussions in Latin America,”
said the economist.
“It’s a complicated international scenario,” said Marchini. “The change in
U.S. interest rates (which rose to 2 percent) has also had a negative impact
on Latin American countries, practically of which have a balance of payment
deficit, meaning they spend more than they earn.”
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While in the past two years the global economy has shown signs of recovery
following the 2008 world financial crisis, countries continue to suffer from
the aftermath, especially those with high debt or very open and expansive
monetary policies, he said.
LATAM IN FLUX
Latin America’s downgraded growth forecast is a reflection of recent
changes in the political landscape of its leading economies, said Marchini.
Argentina, for example, has shifted from the early optimism that marked
the first two years of President Mauricio Macri’s term to greater
“pessimism,” following the devaluation of the national currency.
Mexico is in a kind of holding pattern. The renegotiation of the North
American Free Trade Agreement (NAFTA) with the United States and Canada is
dragging on. At the same time, the country elected its first left-of-center
president, Andres Manuel Lopez Obrador, on July 1, but he doesn’t take office
until Dec. 1.
“In Mexico, the renegotiation of NAFTA plus the political change have
generated a measure of doubt regarding what could happen in terms of Mexico-
U.S. ties,” said Marchini. “In Brazil, the picture is above all political,
taking into account that the country is mired in a slow economy and also
finds itself in an election period with many unknowns,” added Marchini.
Brazilians go to the polls on Oct. 7 to elect a new president, but the
field of candidates has yet to be determined.
Other regional countries are also in flux, he said, including Colombia,
where the government will be changing hands, and Venezuela, which continues
to grapple with “serious (economic) difficulties.”
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