The World Bank is holding its annual meetings in Lima, Peru this week. This marks the first time in 50 years that the financial institution will hold its meetings in Latin America. However, this meeting has served to expose the grim realities facing the region as the IMF and World Bank visiting officials have provided a dreadful economic forecast for the region. According to officials of the two financial institutions, Latin America and the Caribbean will see zero growth in 2015. This is in stark contrast to the greater than 4 percent a year that was seen between 2004 and 2013 for the region.
Latin America has been hit very hard by collapsing commodity prices and a strong US Dollar for most of 2015, and countries such as Ecuador, Colombia, Brazil and Venezuela which are heavily dependent on crude oil sales and sale of other commodities have been the hardest hit.
“We are in the midst of a period of slow global growth, the end of the commodity supercycle,” World Bank Group President Jim Yong Kim said in Lima as he provided the forecast of the region’s economy shrinking 0.3% this year, while at the same time stating that the World Bank intends to commit $12billion in loan facilities for the region. Similar downgrades have been provided by the IMF and the UN’s ECLAC.
No doubt, this gloomy forecast is sure to hit emerging market currencies of the region led by the Brazilian Real.