Bloomberg Línea — The Economic Commission for Latin America and the Caribbean (ECLAC) published Tuesday its new economic forecasts for the region for this year, revising upward its GDP growth forecast, taking it from 1.2% in April to 1.7% in its September report.
However, the report points out that low growth levels will continue in the region, as other international organizations have specified, and detailing that by 2024 a decline in the growth rate is projected that would lead regional GDP to increase by 1.5%.
“Despite the falls in the inflation rate, developed countries will probably continue with their contractionary monetary policies, so we cannot expect a significant drop in external interest rates this year, and financing costs for our countries will remain high”, said the organization, explaining that these factors are added to the dynamics of the world economy that remains on a path of low economic growth and global trade.
It also pointed out that public debt is at high levels, which, together with the increase in external and domestic interest rates and an expected drop in tax revenues as a result of lower growth, makes it possible to foresee limited fiscal space for the region as a whole.
“Low growth in Latin America and the Caribbean could be aggravated by the negative effects of a worsening of climate shocks, if the investments in climate change adaptation and mitigation required by the countries are not made,” said ECLAC executive cecretary José Manuel Salazar-Xirinachs.
Forecasts for sub-regions and countries
The United Nations’ agency projected that all Latin America’s sub-regions will show lower growth compared to 2022: South America will grow by 1.2% (3.7% in 2022), the group formed by Central America and Mexico by 3.0% (3.4% in 2022), and the Caribbean (excluding Guyana) by 4.2% (6.3% in 2022).
By countries, the new report maintained the figures for Haiti and Chile that it delivered in April: -0.7% and -0.3%, respectively.
But it is noteworthy that Argentina’s forecast was revised downward for 2023, taking it from 2% lower in the last report to a decrease of 3% in its latest report.
Meanwhile, Paraguay and Panama would be the countries with the highest GDP growth this year, with rates of 4.2% and 5.1% respectively. Meanwhile, Guyana would see an expansion of 25.1%, which, although a high rate, was revised downward, as in April it was projected at 37.2%.
For Brazil and Mexico, the main economies of the region, ECLAC forecast growth of 2.5% and 2.9%, respectively.
What is the outlook for 2024?
“Projections for 2024 indicate that the low economic dynamism in the region would continue. The international context is expected to continue to be unfavorable, with world GDP and trade growth well below historical averages,” the text states.
Thus, growth for the following year was projected at 1.5%, and for the sub-regions a forecast of 1.2% was given for South America; 2.1% for Central America and Mexico; and 2.8% for the Caribbean (excluding Guyana).
The international organization is also concerned about the quality of employment in a context of low growth, as it is very likely that workers will become more vulnerable, have lower levels of social protection and will be employed in less productive sectors.
“Faced with the challenges of boosting growth and addressing climate change, it is essential to boost public and private investment. Public investment in the region is low compared to advanced economies, and even compared to other developing regions. This low level of investment has resulted in a public capital stock -infrastructure- that is insufficient to boost economic growth and promote productive development,” it added.