Guard against crisis contagion, IMF tells Latin America

Haiti Sun (IANS) Friday 3rd February, 2012

The Latin America and Caribbean economies should be poised to take a string of steps including easing their monetary policies to guard against contagion risks triggered by the eurozone debt crisis, an International Monetary Fund (IMF) official said.

The Latin America and the Caribbean economies should hope for the best and prepare for the worst, Nicolas Eyzaguirre, director of the IMF's Western Hemisphere Department, cautioned in an article carried on the IMF blog Thursday.

These economies should "be ready to ease monetary policy, where strong institutions and low inflation would permit it", and watch financial systems closely for signs of stress, Eyzaguirre noted.

They should rebuild fiscal buffers to maintain fiscal credibility and prepare for a further deterioration in global conditions, he stressed, adding that they needed to maintain flexible exchange rates to buffer shocks, particularly from commodity prices, reported Xinhua.

These policies would give the region the best protection against increasing global uncertainties, he said.

The outlook for the region hinged on policy action in Europe. Eurozone policymakers needed to step up their efforts to check the crisis, and put an end to the rise in sovereign spreads and the cutback in bank lending that threaten the global economic recovery this year, noted the article.

The global lender last month sharply lowered its 2012 global economic growth forecast to 3.3 percent in the face of the escalating eurozone debt crisis.