IMF cuts Latin America, Caribbean growth forecasts on energy shock, little AI boost

NEW YORK, Oct 12 (Reuters) – The International Monetary Fund trimmed its growth forecasts for Latin America and the Caribbean for this year and next and said most of the region was getting little lift from the artificial intelligence boom that has helped other economies absorb the energy shock from the Middle East war.

In its World Economic Outlook, released early on Tuesday in Bangkok, the Fund projected regional growth of 2.3% this year. That is down from 2.5% growth in 2025 and from its July forecast of 2.4% growth for 2026. The IMF cut its 2027 forecast to 2.5% from 2.7%.

The regional downgrades come even as the Fund nudged up its world growth forecast for this year to 3.1% from July’s 3.0%, crediting rerouted energy supplies and AI-driven investment for the resilience of what it calls a split global economy.

The Middle East war has turned energy into a global inflation shock, with Brent crude about 45% above its prewar level. Higher fuel and power costs are squeezing households and businesses, while fears of persistent inflation have helped push global borrowing costs to multidecade highs.

In Latin America, the IMF said, the energy shock’s effect depends on whether gains for commodity exporters outweigh losses for energy importers and on how credible central banks’ inflation targets are, adding that “there is little offset from the technology upturn in most countries.”

Of the three Latin American economies the IMF listed separately in its July World Economic Outlook update, Argentina took the deepest cut in its output estimate. The Fund now expects Argentine growth to slow to 2.1% this year from 4.5% in 2025, well below the 3.5% it forecast in July, and it lowered its 2027 forecast to 3.5% from 4.0%. The report shows inflation is forecast to fall to 32.5% this year from 41.9% in 2025.

Brazil’s forecasts fell to 2.2% for this year and 1.9% for 2027, from 2.4% and 2.2% in July, when the IMF had expected Brazilian growth to “remain resilient” this year. The Fund now expects growth to slow next year, citing still-restrictive monetary conditions aimed at bringing inflation back to target, the withdrawal of government fiscal support and global uncertainty.

Mexico moved the other way, with its 2026 forecast raised to 1.5% from 1.2%. The Fund previously linked Mexico’s expected pickup to less restrictive domestic policies. It now points to exports, including through AI supply chains, and to investment that is stabilizing as growth quickens next year. Even so, it trimmed Mexico’s 2027 forecast to 1.8% from 1.9% and said trade and other uncertainties would keep holding back activity.

The report’s tables show Chile’s growth slowing to 0.6% this year from 2.5%, Bolivia’s economy shrinking 3.0% after a 1.6% contraction in 2025, and Venezuelan inflation speeding up to 467.9% from 252.0%.

The IMF said risks remain tilted to the downside. It warned that market turmoil could hit emerging economies through higher government borrowing costs, pressure on their currencies and tighter local financial conditions.

(Reporting by Rodrigo Campos in New York; Editing by Aurora Ellis)

Brought to you by www.srnnews.com

Click here to read the full article