By Milagro Vallecillos
PANAMA CITY, March 19 (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 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.
FOOD INSECURITY
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.
(Reporting by Milagro Vallecillos in Panama City, Jackie Botts
in Mexico City, Fabian Cambero in Santiago)
