IMF cuts Latin America growth outlook as energy shock and weak AI spillover weigh

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IMF cuts Latin America outlook

Highlights

IMF lowers 2024 Latin America and Caribbean growth forecast to 2.3% from 2.4%, with 2027 also cut to 2.5% from 2.7%.
Argentina's 2024 growth projection slashed to 2.1% from July's 3.5%, while inflation is seen falling to 32.5% in 2024 from 41.9% in 2025.
Brent crude now trades about 45% above prewar levels, fueling regional inflation and keeping global borrowing costs at multidecade highs.

Updated regional forecasts and country revisions

As reported by Reuters, citing the International Monetary Fund in its World Economic Outlook released early on Tuesday in Bangkok, the Fund now projects Latin America and Caribbean growth at 2.3% this year, down from 2.4% in its July forecast and below the 2.5% recorded in 2025. It also cuts its 2027 regional forecast to 2.5% from 2.7%.

The downgrade comes even as the IMF slightly raises its global growth forecast for this year to 3.1% from 3.0% in July, citing rerouted energy supplies and AI-led investment. The Fund describes a split global economy in which Latin America benefits less from the technology upswing while still facing the inflationary effects of higher fuel and power costs.

Among the region's largest economies, Argentina receives the sharpest downgrade. The IMF now expects Argentine growth to slow to 2.1% this year from 4.5% in 2025, well below the 3.5% forecast in July, while its 2027 projection falls to 3.5% from 4.0%; inflation is forecast to ease to 32.5% this year from 41.9% in 2025.

Brazil's forecast falls to 2.2% this year and 1.9% in 2027, from 2.4% and 2.2% in July. The IMF says still-restrictive monetary conditions, the withdrawal of fiscal support and global uncertainty are expected to slow activity next year.

Mexico is the main exception among the larger economies, with its 2026 forecast raised to 1.5% from 1.2%. The Fund points to exports, including through AI supply chains, and to investment that is stabilizing as growth quickens next year, although it trims Mexico's 2027 forecast to 1.8% from 1.9%.

Energy costs, inflation risks and regional pressure points

The IMF says the impact of the energy shock in Latin America depends on whether gains for commodity exporters outweigh losses for energy importers and on how credible central banks remain in defending inflation targets. It adds that most countries have little offset from the global technology upturn.

The report says the Middle East war has turned energy into a global inflation shock, with Brent crude about 45% above its prewar level. Higher fuel and electricity costs are squeezing households and businesses, while concerns about persistent inflation are helping keep global borrowing costs at multidecade highs.

Other country data in the report underline the uneven regional picture. Chile's growth slows to 0.6% this year from 2.5%, Bolivia's economy shrinks 3.0% after a 1.6% contraction in 2025, and Venezuelan inflation accelerates to 467.9% from 252.0%.

The IMF says risks remain tilted to the downside, warning that market turmoil could hit emerging economies through higher government borrowing costs, pressure on currencies and tighter domestic financial conditions.

Our earlier article on the global diesel squeeze explained how war-related disruptions to refining capacity and trade flows were pushing diesel prices higher and feeding through into transport costs and broader inflation. It also outlined how policy moves such as strategic stock releases and relaxed export controls can temporarily ease shortages, but risk fragmenting the global energy system and leaving smaller economies more exposed to future shocks.

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