WASHINGTON – The International Monetary Fund on Thursday sharply lowered its growth forecast for Latin America and the Caribbean to 0.5 percent in 2015 and 1.7 percent next year, citing lower commodity prices and China’s transition to a new growth model.
Those figures are down from the IMF’s April projections for 0.9 percent growth this year and 2 percent next year in Latin America.
In the latest update of its World Economic Outlook report, the IMF predicted that Brazil will contract 1.5 percent and Mexico will grow 2.4 percent this year.
In the earlier forecast in April, the Washington-based organization had projected Brazil’s economy would shrink 1 percent and that Mexico would expand by 3 percent.
The IMF said an austerity program aimed at getting Brazil’s economic house in order would adversely affect growth in the short term, while Mexico was hit by the 0.7 percent first-quarter contraction in the United States, its biggest trading partner.
The IMF is projecting that Brazil will grow 0.7 percent and Mexico’s GDP will expand by 3 percent next year, down from the April forecast for 1 percent and 3.3 percent growth, respectively.
The lower forecast for Latin America is mainly due to a steady decline in commodity prices as China shifts its economic model to one less dependent on exports and government investment and more reliant on domestic consumption, as well as “tighter external financial conditions,” the IMF report said.