World Bank report sees more growth for Latam in 2003
<a href=reuters.com>The World Bank Wed April 2, 2003 10:59 AM ET
WASHINGTON, April 2 (Reuters) - The World Bank on Wednesday predicted Latin America would see a small 1.7 percent bounce in real GDP this year, closing the book on a gloomy 2002 when an Argentine recession weighed the region down.
The projection assumes Argentina will swing into positive growth territory this year. That country's 11-percent drop in gross domestic product was mainly responsible for Latin America's economy shrinking 0.9 percent in 2002, the Bank said.
Excluding Argentina, the region would have grown a modest 0.8 percent.
Looking ahead "the forecast assumes that challenging external financial markets will remain a headwind against the region for the next couple of years, although the worst of the credit cycle is now behind us," the World Bank stated in its latest Global Development Finance report.
For 2004, the World Bank forecasts 3.8 percent growth.
Latin America was the world's worst-performing region last year, pounded by big recessions in Argentina, Venezuela and Uruguay and election uncertainty in Brazil. Sharp drops in capital flows also hurt as investors shunned what the bank calls the "heavily indebted economies of Latin America."
This year, Argentina's GDP should rise 2.6 percent, even though the World Bank cautions the country is a "wild card."
"There is now clear evidence that the economy has moved off its lows and that banks have recovered sufficiently for the payments system to be up and running again," the report says.
"What is unknown is how enduring this phase will be."
If Argentina's presidential elections in April produce a strong government that strikes an early deal with the IMF and external creditors, "then there should be substantial scope for growth."
Argentina and the IMF tried over 11 months to strike a deal for that country to obtain much-needed aid, as both sides haggled over issues that ranged from bank restructurings to utility rates.
Both sides then opted for a more modest agreement that reschedules payments to multilateral lenders until a new government takes over at the end of May.
The report says "gross market-based financial flows" to the region fell by $31 billion, down 40 percent. Net foreign direct investment dropped to $42 billion from $69 billion in 2001, "with declines evident across all countries."
"Sluggish growth and a slowdown in economic and political reforms are expected to continue to hold back FDI flows to Latin America."