ECLAC worsens GDP growth in Latin America by a tenth of …

Madrid, 20 years old (Europe Press)

Latin America and the Caribbean’s GDP will grow by 1.2% in 2023, a tenth less than expected last December, the Economic Commission for Latin America and the Caribbean estimates. Caribbean (Sebal)

This downward revision is attributed to the complex external scenario faced by the economies of the region this year, which is characterized by low growth in economic activity, global trade and high monetary policy rates.

In addition, the financial turmoil observed at the beginning of March exacerbated the uncertainty and volatility in the financial markets. For this reason, the 2023 growth projections for the region are at downside risk given the potential for disruptions to the global banking system to emerge and intensify.

Besides financial risks, uncertainty remains regarding the global and regional effects that a prolongation of the war in Ukraine and increased geopolitical fragmentation could have on economic growth, commodity prices, and global trade.

The inflationary and monetary effects will be strong

As in the rest of the world, inflation in the region is showing a downward trend. Although the Economic Commission for Latin America and the Caribbean expects that the process of raising interest rates in various countries of the region may come to an end, the effects of restrictive policy on private consumption and investment will appear more strongly this year, given the delays with which monetary policy operates.

In terms of fiscal policy, Latin America faces a scenario in which there will be limited room for maneuver due to high levels of public debt.

The agency warns that “in the context of high demands for public spending, measures will be needed to enhance fiscal sustainability and expand fiscal space by strengthening the collection and redistribution capacity of tax policy.”

Best performing in the Caribbean and Central America

In detail, South America will have the lowest growth rate in the region, remaining at 0.6% at the end of the year compared to the 1% estimated by ECLAC in its latest forecast.

For its part, the agency improved growth prospects for Central America and the Caribbean, from 3% and 3.1% expected in December to 3.1% and 3.5%, respectively.

The upward revision of the economies of this region comes as a result of the improvement in growth prospects for the United States, a major trading partner and main source of remittances from their countries, which will benefit both the external sector and private consumption. The expected lower energy prices for this year compared to 2022 will also be in their favor, given that many of them are net importers of energy.

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