IMF Cuts Latin America, Caribbean Growth Forecasts on Energy Shock, Little AI Boost

  • 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, the Fund projected regional ​growth of 2.3% this year. That is down from 2.5% in 2025 and from its July forecast of 2.4% ​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 ⁠ 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.
  • The IMF cut Brazil’s growth forecast to 2.2% for 2026 and raised Mexico’s to 1.5%. It expects Chile’s growth to slow to 0.6%, Bolivia’s economy to shrink 3.0% and Venezuela’s inflation to climb to 467.9%. It warned that risks remain tilted to the downside from market turmoil.

(Source: Reuters)