The Impact of the Gloomier Global Outlook on Latin America

The IMF has sharply marked down its forecast for world growth and it now expects a mild recession in the euro area. Naturally, weaker world growth will affect economic activity in Latin America and the Caribbean. Concretely, the Fund expects the world economy to grow by just 3¼ percent in 2012, ¾ percentage points lower than our September forecasts. In contrast, our forecast for the U.S. economy for 2012 is unchanged, as incoming data signal a stronger—but still sluggish—domestic recovery that will offset a weaker global environment. Commodity prices will be affected by ebbing global demand, with oil projected to fall about 5 percent and non-oil commodities about 14 percent.

Global Economy: Continuing Recovery But Clouds on the Horizon

The International Monetary Fund remains cautiously optimistic about the pace of recovery, but there are clear dangers and policy challenges ahead. IMF chief economist Olivier Blanchard says how Europe deals with fiscal and financial problems, how advanced countries proceed with fiscal consolidation, and how emerging countries rebalance their economies, will determine the outcome.

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