#Outlook2018 for Latin America: Will next year be better?
World Bank Chief Economist for Latin America and the Caribbean Carlos Végh said on Wednesday that after six years of growth deceleration, 2017 would constitute the first year with an increase in growth. The improvement was mainly driven by a strong recovery in Argentina and a more tepid one in Brazil.
However, the region will not have the benefits of favorable external factors such as a buoyant global economy or a great demand of raw materials. This means that Latin America must boost its own growth and put its house in order - in some cases with difficult public spending and money management decisions.
This was acknowledged by Végh during the presentation of the report "Between a rock and a hard place: the monetary policy dilemma in Latin America and the Caribbean”.
This commodity-exporting emerging markets face a critical monetary policy dilemma each time there is an external shock, for example a sudden fall in commodity prices. How should the monetary authority react? Raise the policy interest rate to defend the currency and prevent inflation from taking off or reduce the policy rate to stimulate the economy?
Given the weak fiscal situation, a source of concern for the near future is that there will be little room for countercyclical fiscal policy if it were needed to boost growth and/or support fiscal rebuilding efforts.