Latin America Faces Unusually High Risks by Santiago Acosta-Ormaechea, Ilan Goldfajn and Jorge Roldos published by IMF (4/2022).
“The War in Ukraine, higher inflation, tighter financial conditions, economic decelerations of key trading partners, and social discontent may dim growth prospects.
The war in Ukraine is shaking the global economy and raising uncertainty about the outlook for Latin America and the Caribbean.
The impact is being felt in Latin America through higher inflation that is affecting real incomes, especially of the most vulnerable. Policymakers are reacting to this challenge by tightening monetary policy and implementing measures to soften the blow on the most vulnerable and contain the risks of social unrest.
But there are other risks looming. A possible escalation of the war could eventually lead to global financial distress and tighter financial conditions for the region.
In addition, the ongoing tightening of monetary policy in the United States, as the Federal Reserve takes a more hawkish stance, could eventually affect global financial conditions.
Higher global and domestic financing costs can accelerate capital outflows and represent a challenge for the region, given large public and external financing needs in some countries and the limited resources to finance investment in the region.
Any greater growth deceleration in China, because of the pandemic or other reasons, could also have an impact on key export prices and trade in the region. All these risks cloud growth prospects for Latin America and require policy action…”
