Argentina to lead regional growth in 2007, says IMF

A report from the International Monetary Fund, IMF, increased 2007 growth forecasts for the region with Argentina clearly leading while Chile and Paraguay expansions were downgraded.

The IMF estimates from the “World Economic Prospects” show Argentina will grow 7.5% this year, 1.5 percentage points above the previous forecast from September.

Argentina expanded 8.5% in 2006 half a percentage higher than IMF forecast and is expected to grow 5.5% in 2008.

Argentina’s current account surplus is estimated to fall from 2.4% of GDP in 2006 to 1.2% in 2007 and 0.4% in 2008.

However in spite of the good macroeconomic performance inflation is forecasted to remain unabated: 9.8% in 2006; 10.3% in 2007 and 12.7% in 2008. Only Venezuela is expected to surpass this inflationary data.

Regarding Uruguay IMF had to correct forecasts: growth in 2006 was 7%, compared to IMF September estimate of 4.6%. For this year IMF forecasts 5% and 3.5% in 2008.

According to the IMF report the region will expand 4.9% this year compared to 5.5% in 2006. But a global bull market for commodities and high prices will keep Argentina and Brazil’s economies performing strongly.

Nevertheless the report cautions about Argentine authorities insistence on “administrative measures” to block pressure from prices, while demand is stimulated by negative interest rates (because of inflation) and a strong fiscal expansion.

Overall in the region all economies will expand at a slower pace with the exception of Brazil and Chile.

According to the report 2007 estimates are as follows: Brazil 4.4% (3.7% in 2006); Chile 5.2% (4%); Colombia 5.5% (6.8%); Mexico 3.4% (4.8%); Peru 6% (8%); Uruguay 5% (7%); Ecuador 2.7% (4.2%) and Venezuela 6.2% (10.3%).

Central America is forecasted to average 5%, below last year’s 5.7% and the Caribbean drops from 8.3% to 5.4%.

Regarding the global scenario, IMF estimates 2007 will be “less favorable” as growth worldwide moderates and prices of oil and some metals decline from their peak 2006 records.

The countries most vulnerable to this scenario are those closely linked to the United States: Mexico, Central America and the Caribbean and metal and oil exporters, Chile, Ecuador and Venezuela.

The critical challenge is to build from the reforms that have been implemented to accelerate growth, strengthen macroeconomic stability and guarantee that growth benefits are broadly distributed, recommends the IMF report.

Reforms that help boost export growth facilitate the reduction of government debt and keep inflation low contributing to greater investors stability and trust.