IMF cuts Latin America and Caribbean growth forecasts as energy costs rise

The International Monetary Fund cut its growth forecasts for Latin America and the Caribbean in its October outlook released on Tuesday, October 13, projecting 2.3% expansion in 2026 and 2.5% in 2027. The reductions matter for a region facing higher energy costs while, according to the IMF account reported by Reuters, most countries receive little offset from the technology upturn supporting growth elsewhere.

Both figures are forecasts, rather than measured outcomes. The 2026 projection is down from 2.4% in the Fund’s July outlook; the 2027 projection is down from 2.7%. Reuters said the IMF estimated that the region grew 2.5% in 2025. The Fund made the regional cuts even as it raised its forecast for global growth in 2026 to 3.1%, from 3.0% in July.

How the IMF’s regional forecast changed

The July outlook provides the point of comparison for the new figures. It projected Latin American and Caribbean growth of 2.4% in 2026 and 2.7% in 2027. The October revisions therefore amount to a reduction of 0.1 percentage point for this year and 0.2 percentage point for next year. A lower forecast still implies growth across the region overall; it does not mean every economy is expected to contract.

Reuters attributed the energy shock to the Middle East war and reported that Brent crude was about 45% above its prewar level when it published its account. Higher fuel and power costs squeeze households and businesses. The IMF said the regional effect depends in part on whether gains for commodity exporters outweigh the costs borne by energy importers, and on the credibility of central banks’ inflation targets. The supplied country forecasts do not establish that balance for each economy.

Argentina, Brazil and Mexico diverge

Argentina received the largest downgrade among the major economies detailed in Reuters’ report. The IMF now forecasts growth of 2.1% in 2026, compared with its July estimate of 3.5%. Its 2027 forecast fell to 3.5% from 4.0%. The Fund also projects inflation of 32.5% this year, down from 41.9% in 2025. Those inflation figures describe a slower expected rate of price increases, not falling prices.

For Brazil, the IMF cut its 2026 growth estimate to 2.2% from 2.4% and its 2027 estimate to 1.9% from 2.2%. The Fund expects growth to slow next year amid restrictive monetary conditions, the withdrawal of government fiscal support and global uncertainty. Those factors make Brazil’s outlook more than a direct measure of the oil-price shock alone.

Mexico moved in the opposite direction for 2026. The IMF raised its growth forecast to 1.5% from 1.2%, citing exports, including links to AI supply chains, and investment stabilizing as growth quickens. It edged down Mexico’s 2027 projection to 1.8% from 1.9%, however, and said trade and other uncertainties would continue to weigh on activity. Mexico’s near-term upgrade is therefore an exception within the broader regional downgrade, rather than a reversal of every risk the Fund identified.

Other country pressures and risks to the outlook

The country figures point to different kinds of pressure beyond the three largest revisions. The IMF’s table put Chile’s expected growth at 0.6% in 2026, against 2.5% in 2025. It projected a 3.0% contraction for Bolivia after a 1.6% contraction in 2025. For Venezuela, it forecast inflation of 467.9% this year, up from 252.0% last year. Growth and inflation measure different outcomes, so these figures should not be read as a single ranking of economic performance.

The Fund said risks to its outlook were tilted downward. Market turmoil could increase emerging economies’ government borrowing costs, put pressure on their currencies and tighten financial conditions at home. Reuters also described inflation concerns contributing to borrowing costs reaching multidecade highs globally. Those are risks to the projections, not a claim that each of these effects has already occurred in every Latin American and Caribbean economy.

The next test is whether energy costs, export gains, investment and financing conditions develop as assumed in the IMF forecasts. The published figures identify where the Fund has changed its expectations; they cannot establish future growth in advance. In particular, the available account does not quantify each country’s direct exposure to higher energy import costs against possible commodity-export gains, leaving the size of that trade-off unresolved.