The Economic Commission for Latin America and the Caribbean (ECLAC) says economic activity in the region continues to exhibit low growth trajectory.
In its “Preliminary Overview of the Economies of Latin America and the Caribbean 2023”, ECLAC said, “the region will stay on a path of low growth, which means job creation will decelerate and informality and gender gaps will persist, among other effects”.
According to the report, Latin America and the Caribbean will grow 2.2 per cent on average in 2023 and 1.9 per cent in 2024, “which points to a deceleration in regional growth from the levels seen in 2022”.
Although all the sub-regions will have lower growth in 2023 than they did in 2022, the report emphasizes the heterogeneity among countries in the region.
South America is seen growing by 1.5 per cent as against 3.8 per cent in 2022, the group made up of Central America and Mexico by 3.5 per cent down from 4.1 per cent last year and the Caribbean, without including Guyana, is forecast to grow 3.4 per cent down from 6.4 per cent last year.
ECLAC said, in 2024, “it is expected that the region will maintain this dynamic of low growth and all the sub-regions will grow less than in 2023” with the Caribbean predicted to register 2.6 per cent without including Guyana.
“These projections reflect, in part, low dynamism in economic growth and global trade, which translates into a limited impetus from the global economy,” ECLAC said.
“Although inflation has declined, the interest rates of the main developed economies have not, which means that financing costs have remained at high levels throughout the year and they are expected to stay that way in coming years.”
Furthermore, ECLAC said this low growth is also attributable to the “limited domestic space for fiscal and monetary policy faced by the region’s countries.”
In this regard, ECLAC emphasized that while public debt levels have declined, they remain high, adding this is coupled with the increase in financing costs, which “restricts fiscal space.”
In the monetary arena, ECLAC said inflation continues to decline in the region, “but monetary policy still has a restrictive bias, due to the effects that rate cuts could have on capital flows and the exchange rate, given that high interest rates are still in effect in developed countries.”
In 2023, ECLAC forecasts that average inflation in the region will finish the year at 3.8 per cent, “far below the 8.2 per cent recorded in 2022.”
In 2024, ECLAC said that decline will continue, with the average regional inflation rate estimated at 3.2 percent.
The report estimates that the number of employed persons will have grown 1.4 per cent in 2023, which points to a four percentage point drop from the 5.4 per cent recorded in 2022.
“This lower rate of job creation is seen continuing in 2024, when the number of employed persons is projected to grow by one per cent,” ECLAC said.
ECLAC’s executive secretary, José Manuel Salazar-Xirinachs, said to escape the low-growth trap, “it is necessary to escalate productive development policies with a focus on strategic, dynamic sectors, carry forward policies to promote public and private investment, and adjust the financing framework to enhance resource mobilisation”.
In its Preliminary Overview 2023, ECLAC called for complementing productive development policies with macro and financial policies “that would allow for proper management of the financial and foreign-exchange risks faced by the region, and would stimulate domestic resource mobilization to expand fiscal space and increase investment and productivity.”
Likewise, ECLAC said, “policies are needed that would enable greater inclusion and reduction of the significant inequalities that characterise the region, among them gender inequalities.”
It said reforms to the international financial and tax architecture are needed “to accompany the region’s countries in achieving the Sustainable Development Goals, by directing resource mobilization towards the region”.
