Short- and medium-term consequences of the new external context and growth-oriented macroeconomic policy options

The Latin America and Caribbean region’s external economic environment and the policy responses adopted by the countries have been key determinants of the region’s performance. The most recent evidence of this was the pronounced 1.6% contraction of regional GDP in 2009 as a result of the global financial crisis. The diverse consequences of external shocks and countries’ differing response capacities depend on multiple factors such as the intensity of the relationship with the world economy through trade and financial channels, export specialization and composition of imports, and strengths and weaknesses in relation to debt, the sustainability of public and private finance, levels of international reserves, access to external liquidity and the characteristics of the financial system. This chapter examines the repercussions of the external scenario forecast for the medium term (discussed in chapter I) on growth in the short and medium term for different groups of countries in the region in the light of their respective strengths and vulnerabilities. On the basis of these specific features, the chapter discusses guidelines for the macroeconomic policies of the different groups of countries.

Related Subject(s): Economic and Social Development