Recently, the International Monetary Fund (IMF) called on countries in Latin America and the Caribbean to focus their policies on boosting economic growth in its latest Regional Economic Outlook (REO) report. The IMF pointed out the inadequacy of the current economic reform agendas in these regions and warned that the expected slowdown in economic activity could lead to a vicious cycle of low growth and social unrest.
The report forecasts economic growth in Latin America and the Caribbean of 2.5 percent in 2025, slightly higher than the 2.1 percent in 2024 and it is estimated to be around 2.5 percent per year in the next five years. However, overall economic growth in Latin America's seven major economies, Brazil, Chile, Colombia, Mexico, Paraguay, Peru, and Uruguay, is expected to slow to 2 percent in 2025 from 2.4 percent in 2024. The IMF attributes this slowdown to longstanding issues such as underinvestment, declining birth rates, and aging populations. The IMF's analysis also highlights the region's rising debt, pointing to the need for fiscal reforms and appropriate monetary policies to ease inflationary expectations and reduce country risks.
In view of the economic forecasts in the region, the IMF recommends that relevant countries make structural economic policy adjustments, including measures to promote international trade, develop high-tech industries, improve the efficiency of public investment, and enhance labor market flexibility. In response to the generally low level of personal income taxes in the region, the report suggests that the fiscal recources to support economic growth could be gained by raising personal income taxes. In addition, given the region's rich green mineral resources, relevant countries could seize the opportunity of the global green transition to improve the business environment to attract capital and increase the sustainable use of natural resources to support social and public investment needs.