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Latin America in 'a new phase' of economic weakness, World Bank says

The World Bank lowered its 2019 growth estimate for Mexico as it issued a bleak forecast for the broader Latin American region.

In its semiannual report, the group said that it now expects Mexico's GDP to come in at 0.6% for the year, down from its 1.7% forecast in June, and expects the country's deceleration to continue. It sees Mexico's growth hitting 1.5% in 2020 and 2.0% in 2021.

Expectations for Brazil, the region's largest economy, is also weak, with 2019 growth expected to hit just 0.9% followed by 2.0% growth in 2020.

For the overall region, the World Bank said that Latin America and the Caribbean have moved into "a new phase of weak economic performance." Excluding Venezuela, it sees the region's growth at 0.8% for 2019 and 1.8% in 2020.

In the report's conclusion, the World Bank underscored that the region had returned to the path of sluggish growth characteristic of the years before the commodity boom. This was attributed in large part to the challenging situation of the region's three biggest economies, "... with Argentina mired in yet another economic crisis, Brazil just emerging from a recession, and Mexico facing an economic slowdown."

The World Bank encouraged countries in the region to focus on trade integration to boost productivity, and noted that both the United States-Mexico-Canada and EU-Mercosur agreements "could have a significant positive overall effect on growth."

"The short and medium-term outlook is not particularly encouraging," the World Bank said in a statement. "Export performance has been relatively weak and limited fiscal space leaves little room to stimulate domestic demand."

It also pointed to the severe recession in Argentina, which it expects "will become deeper before the economy starts recovering." The World Bank expects the country's economy to contract by 3.1% in 2019 followed by a 1.2% decline in 2020. It forecast growth resuming at a pace of 1.4% in 2021.