Roundup: IMF reports mixed outlook for Latin American, Caribbean economy

The International Monetary Fund (IMF) Wednesday predicted a 0.5 contraction in the GDP growth of Latin American and Caribbean region for 2016, marking the first time for the area to see a dip for two years in a row since 1983.

In a newly released report on "Regional Economic Outlook for Latin America and the Caribbean," the IMF said that the "deceleration in activity reflects weak external demand, further declines in commodity prices, volatile financial conditions and important domestic imbalances and rigidity."

However, the global financial body predicts that the region will return to growth in 2017 with a GDP rate of 1.5 percent. According to the report, the best South American players for 2016 are Panama, which is expected to grow by 6.1 percent, Dominica, St. Kitts and Nevis and Nicaragua.

The fate of major regional economies is divided, with Mexico set to grow 2.4 percent and Colombia 2.5 percent. However, other regional powerhouses will tumble, with Argentina predicted to contract by 1 percent, Brazil by 3.8 percent and Venezuela by a staggering 8 percent.

Mexico received a mild endorsement by the agency, which said that the country will be supported by "healthy private domestic demand and spillovers from a strong U.S. economy. The depreciation of the peso and lower electricity prices should boost manufacturing production and exports."

As for other major South American economies, the IMF report forecast that Brazil and Venezuela face similar economic and political problems, while Argentina can be more optimistic about the future.

"Brazil is mired in a deep recession," it said, adding that "Argentina's medium-term growth prospects have improved noticeably as a result of an ongoing transition to remove domestic imbalance and distortions and correct relative prices."

Venezuela is expected to see its economy shrink by 4.5 percent in 2017, the report said. Ecuador will contract by 3.8 percent, but the situation is likely to worsen once the influence of the recent earthquake on the country's economy is factored in, the IMF said.