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World Bank forecasts 0.9% contraction in 2016 for Latin America, Caribbean

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World Bank forecasts 0.9% contraction in 2016 for Latin America, Caribbean

As Latin America and the Caribbean enters its fifth year ofeconomic slowdown and its second year of contraction, countries in the regionare struggling to find a balance between spending cuts and minimizing theresulting impact on economic activity, the World Bank said in an April 12report.

The organization expects the region as a whole to contractby 0.9% in 2016, a forecast that is slightly worse than the 0.5% predicted by the IMF and the 0.6% shrinkageestimated by ECLAC, the United Nations' Economic Commission for Latin Americaand the Caribbean.

According to the World Bank, South America is expected tocontract by more than 2% this year on the back of steep recessions in Braziland Venezuela. However, in Mexico, Central America and the Caribbean, whichdepend less on commodity exports and are more closely tied to the economicrecovery in the U.S., growth is expected to remain positive in 2016 at 2.5%.

"In contrast to the global financial crisis of 2008-09,when commodity prices recovered quickly, the region now faces the end of thecommodity boom that has caused income and purchasing power to fall in a ratherdurable way," said Augusto de la Torre, the World Bank's chief economistfor Latin America and the Caribbean.

"Some countries do have the space to adapt gradually tothe new environment making sure that neither economic activity nor the mostvulnerable are disproportionately affected. Others however may not have thatluxury," he added.