IMF cuts Latin America, Caribbean growth forecasts on energy shock, little AI boost

The International Monetary Fund has lowered its growth forecasts for Latin America and the Caribbean due to an energy shock from the Middle East war, with little assistance from the artificial intelligence boom. The Fund now projects the region's growth to be 2.3% this year, down from 2.5% in 2025 and its July forecast of 2.4% for 2026.

The forecast for 2027 has also been reduced to 2.5% from 2.7%. Despite the regional downgrades, the World Growth Forecast for this year has been increased to 3.1% from 3.0% in July, mainly due to rerouted energy supplies and AI-driven investment. In Latin America, the energy shock's impact varies depending on the balance between gains for commodity exporters and losses for energy importers, as well as the credibility of central banks' inflation targets.

The IMF notes that few countries are experiencing significant offset from the technology upturn. Argentina's output estimate has been cut the most, with the Fund forecasting a slowdown to 2.1% this year from 4.5% in 2025, and its 2027 forecast down to 3.5% from 4.0%. Brazil and Mexico have also seen their growth forecasts revised downward, while Chile's growth is expected to slow to 0.6% this year from 2.5%.

The IMF warns that market turmoil could further negatively impact emerging economies through higher borrowing costs, currency pressures, and tightened local financial conditions.