By Milagro Vallecillos
PANAMA CITY (Reuters) – Latin America could see zero economic growth this year if the banking crisis in the U.S. and Europe “spreads across the world,” Inter-American Development Bank Chief Economist Eric Parrado said on Sunday.
Parrado, who spoke during an annual IDB conference in Panama City, said IDB remains optimistic the region will be “resistant to these types of shocks.”
IDB President Ilan Goldfajn said Wednesday that Latin America has a “very resilient and well managed” financial system.
Stocks and currencies in the region tumbled on Wednesday as traders worried over the stability of Swiss lender Credit Suisse following the crash of Silicon Valley Bank.
If the banking crisis does not spread to the region, IDB predicts 1% growth in 2023 and 1.9% in 2024, significantly down from the region’s better-than-expected growth of 3.9% in 2022.
Parrado said the lower growth estimates are due in part to depressed global demand, sky-rocketing commodity prices, and high interest rates to control inflation.
While average annual inflation in Latin America and the Caribbean has started to ease, it reached 9.6% in July 2022, the highest since the global financial crisis of 2008, according to IDB.
As central banks continue to maintain or tighten monetary policy, IDB advised countries to prioritize subsidies for the poorest sectors and incentivize infrastructure investments and formal employment, while controlling public debt ratios.
Earlier this week, Moody’s (NYSE:) Investors Service said global uncertainty in the banking center would have a limited impact on Latin America banks.
On Friday, Bank of Mexico’s Governor said she saw no risk of contagion from the U.S. banking crisis.
During Saturday’s meetings, IDB Invest Corporate Division chief Aitor Ezcurra also said Latin America is suffering from an “unprecedented” food security crisis.
Around 41% of the region’s residents experienced food insecurity in 2021, up from 32% in 2019, Ezcurra said. He blamed rising food prices and falling agricultural output due in part to the rising costs of fertilizers, fuel and other agricultural inputs.
The IDB, headquartered in Washington, is a key investor in Latin America and the Caribbean, behind nearly 600 ongoing infrastructure, health, tourism and other projects. It was responsible for $23.4 billion in financing and other financial commitments in 2021.
Click Here to Read the Full Original Article at All News…