The International Monetary Fund on Tuesday lowered its 2022 economic growth forecasts for Latin America and its two largest economies, citing inflation, tighter monetary policy and a lower growth estimate for the United States as keys to the downgrades.
The IMF reduced its growth expectations for Mexico and Brazil by 1.2 percentage points each to 2.8% and 0.3% respectively, while the estimate for Latin America and the Caribbean was cut by 0.6 percentage point to 2.4%.
"The fight against inflation has prompted a strong monetary policy response, which will weigh on domestic demand," the IMF said of Brazil's economic outlook in an update to its World Economic Outlook.
First Deputy Managing Director Gita Gopinath told a news briefing on Tuesday that another reason for the cut to Brazil's forecast is a moderation in the prices of its commodity exports, such as iron ore, which had been elevated last year.
The Fund's report said Mexico will also be somewhat affected by inflation and higher rates, compounded by an expected drop in output growth from the United States, its most important trading partner.
"The US (economic growth) downgrade brings with it the prospect of weaker-than-expected external demand for Mexico in 2022," the IMF said.
Argentina is seen growing 3.0% this year, a 0.5 percentage point increase from the IMF's October estimates, and the 2.5% estimated growth in 2023 is also 0.5 percentage point higher.
The South American country and the IMF are in negotiations on a program to refinance some $41 billion that Argentina has said it cannot pay as scheduled.
"We are adopting a flexible and pragmatic approach and we hope we will make even more progress in the next days," Gopinath said.
For 2023, the IMF sees Latin America and the Caribbean growing at a 2.6% rate, with Brazil growing 1.6% and Mexico's expansion at 2.7%.