IMF improves forecasts for Mexico and Brazil – Financial

While the Brexit means an important downside risk to the global economy, Latin America’s prospects improved in the update of World Economic Outlook report International Monetary Fund ( IMF ).

in the report, July 2016, the IMF raised the growth estimate for Mexico and slowed the fall in the Brazilian economy.

Following the results of the Gross Domestic Product (GDP) in the first quarter of the year, the IMF now expects the economy of Mexico grow 2.5 percent in 2016, 0.1 percentage point higher than expected in April 2017 and its outlook was stable at 2.6 percent.

The conditions for Brazil also improve. The confidence of consumers and businesses seems to have started to rebound and contraction of GDP in the first quarter was more moderate than expected. The international organization estimated that the economic downturn is slightly less serious, a fall of 3.3 percent versus 3.8 percent forecast in April 2017 and warns an increase of 0.5 percent in GDP, from a rate of 0.0 percent predicted in its previous report.

However, the IMF notes that there remain uncertainties about global economic policy that cloud the outlook.

The result of the vote in the UK involves the realization of an important downside risk to the global economy and consequently, the International Monetary Fund adjusted downwards its growth prospects.

now expects a rise in 2016 of 3.1 percent compared to 3.2 percent and for 2017 forecasts a rate of 3.4 percent, compared with 3.5 percent who expected in April.

the IMF part of a scenario in which uncertainty will be reduced gradually in the future and the European Union and the United Kingdom reach agreements that avoid a significant increase in economic barriers; large disturbances do not occur in the financial markets and the political consequences of the referendum are limited. However, he notes that these scenarios may not materialize.

In this context, the prospects have been revised downwards for advanced economies (by 0.1 percentage points in 2016 and 0.2 percentage points in 2017) , while remaining virtually unchanged for the economies of emerging markets and developing countries.

in the United States, growth in the first quarter has been weaker than expected, which has led to a downward revision of 0.2 percentage points from the growth forecast for 2016.

the high-frequency indicators point to a rebound in the second quarter and for the rest of the year, according with the weakening of the headwinds generated by the strengthening dollar and declining investment in the energy sector.

it is projected that the effects of Brexit be moderate, as is expected to reduction of interest rates in the long term and more gradual path of normalization of monetary policy neutralize generally increased corporate spreads, strengthening the dollar and deteriorating confidence.

the euro area, growth has been slightly top than expected, 2.2 percent in the first quarter, driven by strong domestic demand, including a slight rebound in investment, factors which would have been enough to raise estimates in the region if not for the Brexit.

in the report, the IMF warns priority control excessive credit growth according to the needs, foster healthier balance sheets banks, contain mismatches of maturities and currencies, and maintain orderly conditions in the markets.

in addition, policymakers must be prepared to act more decisively and jointly whether the effects of turbulence in financial markets and increased uncertainty threaten to weaken significantly the global outlook.