The Regional Economic Outlook Update for the Western Hemisphere, published by International Monetary Fund (IMF), has marked up its growth forecasts for Latin America and the Caribbean to 1.2 percent in 2017 and 1.9 percent in 2018. A favorable external environment is helping the recovery. Global demand is getting stronger and easy global financial conditions—low global market volatility and resilient capital inflows—are boosting domestic financial conditions.

At the same time, inflation is modera-ting in many countries as the effects of earlier exchange rate depreciations on domestic prices subside, some currencies appreciate, and economic slack (the quantity of labor and capital that remains idle) continues. Inflation at the regional level is expected to decline to 4.2 percent in 2017 (from its peak of 6.2 percent in 2015) and to remain at about 3½ percent thereafter.

Despite this ongoing recovery, prospects for strong long-term growth in Latin America and the Caribbean look dimmer. In the next 3-5 years, Latin America is projected to grow 1.7 percent in per capita terms. This growth rate is almost identical to the region’s performance over the past quarter century and only marginally better than those in advanced economies, raising concerns that the region is not catching up to income levels in advanced countries.

After entering positive territory in the first half of 2017, growth in Brazil is expected to reach 0.7 percent for the whole year and 1.5 percent in 2018.

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