The International Monetary Fund is reporting that inflation is falling throughout the Latin American and Caribbean region.
IMF Deputy Division Chief, Western Hemisphere Department, Anna Ivanova, said that after reaching 7.8 per cent in 2022, headline inflation in the region, excluding Argentina and Venezuela, is expected to decline to five per cent in 2023 and to 3.6 per cent next year.
“In many countries, inflation is returning to the target range of the central banks’ target, but it is quite slow. We expect that the return towards the range will take place by 2024 in the region, as a whole, and to the mid-point by 2025,” she noted.
Ivanova was presenting the findings of the October 2023 ‘IMF Regional Economic Outlook Western Hemisphere: Securing Low Inflation and Nurturing Potential Growth’ report, at the Bank of Jamaica (BOJ) in Kingston on Thursday (October 26).
She said the swift response of the region’s central banks played a key role in controlling inflation, noting that most are well placed to move forward with gradually easing their tight monetary policy stances, while remaining attentive to risks.
In Jamaica, the BOJ is projecting a continued reduction in domestic inflation during the last three months of this year and for most of 2024.
At the Central Bank’s quarterly monetary policy media briefing in August, Governor, Richard Byles, said the general picture is one of success by the BOJ in controlling inflation.
This, he pointed out, despite the rate registering small increases in recent months, moving from 5.8 per cent in April 2023 to 6.1 per cent in May, 6.3 per cent in June, and 6.6 per cent in July.
“Notwithstanding this uptick, inflation is forecasted to generally decelerate to the Bank’s target range of four to six per cent by the December 2023 quarter and, with the exception of a few months in 2024, remain there,” Governor Byles pointed out.
The target of four to six per cent per annum is considered optimal to support Jamaica’s long-run growth and is also consistent with the programmed reduction in public debt.
Low, stable and predictable inflation will facilitate sustainable productivity, economic growth and a reduction in the public debt burden.
Meanwhile, the IMF is reporting that after a strong rebound from the COVID-19 pandemic, growth in the LAC is slowing and is projected to moderate from 4.1 per cent in 2022 to 2.3 per cent this year and remain around the same rate in 2024.
Ms. Ivanova said the slowdown is largely due to a reduction in manufacturing and external conditions.
She said LAC exports lost momentum in 2023 and the region has also been impacted by weakening commodity prices.
“While we see the decline in growth and activity, we see that employment and the labour market in general [are] quite strong,” she noted.
The IMF Deputy Division Chief said to effectively boost growth in the region, countries must, among other things, address “lackluster productivity and low investment, low international trade, labour market rigidities and high informality, high poverty, and particularly high inequality”.
Ms. Ivanova listed climate change and digital technologies as the new challenges facing the region, and highlighted the need to increase trade and address the issue of crime.
She said fiscal strategies should focus on rebuilding the policy space to ensure financial sustainability and boost resilience against future shocks, while protecting key social-spending needs.
Sources: IMF, Jamaica GIS.