The Inter-American Development Bank (IDB) warned that Mexico will be the country in Latin America and the Caribbean (LAC) that will be the hardest hit by the combination of various shocks that the war in Ukraine came to aggravate.
In the macroeconomic report “From Recovery to Renewal: Transforming crisis into opportunity” it is stated that the war Russia vs Ukraine it is exacerbating the problems of higher and persistent inflation rates in advanced economies.
To this is added the financial and growth shock, which reduces expectations for economies worldwide, he said.
Within this context, the IDB pondered that Mexico it will be hit harder by lower growth in the United States; like Central America, they will suffer from a combination of those shocks and from higher oil prices.
“Mexico is the country hardest hit among the countries and regions analyzed, due to its close ties with the United States, with a loss of 2.1% of GDP per year on average for the three years from 2022 to 2024,” he estimated.
Meanwhile, Brazil will be the least affected economy due to its greater links with Europe than with United States; it is expected to benefit from the commodity shock thanks to somewhat less reliance on international capital markets.
During the presentation of the report, the chief economist of the IDB, Eric Parrado, said that the region is coming out of the crisis poorer.
For his part, the institution’s chief economist, Sergio Galindo, warned that risks associated with the war.
Especially for the LAC region as a whole, he considered that the impact of raw materials is favorable in the short term. However, that advantage will diminish over time as they converge to lower levels as evidenced by futures prices, he said.
warned that on the other side is the impact of the slower economic pace of the global world which will depress activity in most of the countries in the region.
He noted that the IDB is forecasting for the 2022-2024 period, the region would lose an average of around 1.1 percentage points of growth.
But in a scenario in which monetary policy becomes more difficult in advanced countries, particularly in the United States with higher interest rates, the situation would be more “complicated” for LAC, he anticipated.
“It would increase the cost of financing and take us to lower growth trends than we are forecasting with an average of 1.5 points of growth loss,” he forecast.