ECLAC indicated that its projections “occur at a time when the countries of the region face limited policy space, both fiscal and monetary.”
The economies of Latin America and the Caribbean face a difficult environment for the remainder of this year and next due to weak global activity, the effect of high interest rates, low domestic consumption, and lower trade, a United Nations agency said in a report Thursday.
In its year-end report for the region, the Economic Commission for Latin America and the Caribbean ( ECLAC ) raised its GDP growth projection for the bloc to 2.2 percent in 2023 compared to its estimate of 1.7 percent issued in September. , thanks to a slight improvement in macroeconomic indicators and a decrease in budgetary pressures.
But the base case persists, he said, and that is largely a reflection of the downward trajectory for the region’s economic performance seen over the last decade.
“These projections occur at a time when the countries of the region face limited policy space, both fiscal and monetary, and limited impulse from the international context,” explained ECLAC.
“The low growth that the region’s economies are expected to present is not only a temporary problem, but also reflects the decline that has been observed in the trend growth rate of regional GDP,” he added.
Although the expected slowdown is widespread, northern countries stand out with better-than-expected growth rates for this year.
In the case of Mexico, GDP will advance 3.6 percent in 2023 – a sharp upward revision compared to the 2.9 percent expected in September – and will expand 2.4 percent next year, helped by the wave of foreign investments that are expected and quite solid internal dynamism.ADVERTISING
The agency explained that although inflation has been declining, the benefits of interest rate cuts have not yet been seen among major economies, such as Brazil, so financing costs continue to constrain the ability to take on debt and raise consumption.
Added to this is the weakness of China and the crisis in its real estate sector, which affects its purchases of raw materials on which mining countries such as Peru and Chile depend.
Colombia, Venezuela, Mexico, and Ecuador, for their part, face the challenge of lower oil exports due to reduced estimates for global fuel demand.
“In Latin America, the countries most exposed to a slowdown in the Chinese economy are those that have it as their main trading partner, namely Chile, Peru, Panama, Brazil, and Uruguay,” the report highlighted.
In the case of Argentina, the third regional economy, ECLAC slightly improved the already negative projections of economic performance, and expects a contraction of 1 percent by 2024, and a drop in GDP of 2.5 percent this year.