April 28, 2009
IMF's Economic Growth Projections for Latin America and Caribbean Appear Questionable
CEPR Co-Director Challenges IMF to Bet $10,000 on its Projections
For Immediate Release: April 28, 2009
Contact: Dan Beeton, 202-239-1460
WASHINGTON, D.C. - Some of the IMF’s economic growth projections for Latin America and Caribbean countries through 2014 appear questionable, according to a new issue brief from the Center for Economic and Policy Research. The issue brief, "Troubled Assets: The IMF's Latest Projections for Economic Growth in the Western Hemisphere" by economist David Rosnick, finds that for some countries – most notably Venezuela and Argentina – the IMF’s projections inexplicably portend a prolonged negative impact of the current world recession, even as countries harder-hit by the downturn, such as Mexico, recover. In other cases, such as Haiti, the IMF projects a surprisingly big growth spurt.
"Of course the IMF is upset with Venezuela and Argentina because of these governments' criticisms of the Fund. But that's no reason to publish implausible economic forecasts for these economies,” said CEPR Co-Director and economist, Mark Weisbrot.
Venezuela grew at an average of 7.1 percent per year from 2002-08, but the IMF projects it to lose 0.1 percent per year through 2014. Along with Argentina and Panama, Venezuela has been one of the fastest growing economies in the Western Hemisphere over the last six years, yet it is the only country in the region that the IMF anticipates will not recover by 2014. This projection appears highly improbable, especially compared to the IMF’s projections for Mexico. Although it is much more heavily dependent on trade with the U.S. than Venezuela is, the IMF projects that Mexico will grow 2.9 percent per year over the next six years, after shrinking by 3.7 percent in 2009.
"The forecast for Venezuela is the least believable of all. If anyone at the IMF wants to put some money on this, I am happy to put up $10,000 on the bet that Venezuela will have an increase in real GDP over the next six years," Weisbrot said.
Haiti, at 0.9 percent per year, experienced the slowest growth of any country in the region since 2002. Yet the IMF is projecting Haiti to grow an average of 2.8 percent per year for the next six years, placing it squarely in the middle of the region.
The IMF has a track record of enormous errors in its economic growth forecasts for both Venezuela and Argentina. These countries have criticized the IMF in recent years and have also experienced very rapid growth over the last six years, contrary to IMF forecasts.