People at the local market in Suárez, Colombia, on August 7, 2022. JOAQUIN SARMIENTO / AFP /Getty Images) (AFP via Getty Images)
The post-Covid 19 economic recovery has ended and Latin America is now swimming against the tide. This year, countries in the region will feel the fall in consumption in the world’s two largest economies, the United States and China, for which growth will slow, the World Bank said on Tuesday. The region will grow by 1.3% this year and 2.4% in 2024.
“This slowdown reflects both monetary authorities’ efforts to control inflation and the secondary effects of an unfavorable world outlook,” the multilateral specialists stressed in their Global Outlook Report. “Slightly slow growth in the US and China is expected to dampen export demand, while rising US interest rates are likely to mean financial conditions will remain tight,” the text added.
“Slow global growth is forecast to impact commodity prices and weaken South America’s trading conditions. According to the forecasts, regional investment will fall this year due to rising financing costs, low business confidence and high regulatory uncertainty,” says the multilateral. The World Bank expects GDP growth in the region’s largest economies, Brazil, Mexico and Argentina, to be lower than this year. In Chile, the Multilateral Group estimates that GDP will fall by 0.9% this year.
In Peru, one of the countries with the highest average growth over the past decade, the economy will suffer from the effects of political instability the country has been going through since its former President Pedro Castillo failed in a coup attempt. “Heavy regulatory uncertainty and the drop in metal prices will slow growth, which is forecast at 2.6% in 2023,” the bank says of Peru.
The multilateral forecasts expect growth in Central America to slow to 3.2% in 2023 “as the slowing US economy reduces exports and remittance inflows. On the other hand, firmer expansion of 5.6% is expected in the Caribbean, but this will partly reflect a long-delayed recovery from the pandemic-induced recession,” the report said.
After years of battling external inflationary shocks stemming from supply chain disruptions in Asia and economic stimulus in the developed world, 2023 will be a year when the region’s central banks battle internal inflation. This could be longer than expected, the bank said, leaving it possible that some central banks in the region will hike rates further, which could dampen economic activity.
“More broadly, projections point to flat living standards in the first half of the 2020s, with GDP per capita growing at an average annual rate of 0.6% between 2020 and 2024. This could make tackling a variety of social issues more difficult and exacerbate the barriers that prevent sustainable and inclusive development in Latin America and the Caribbean,” according to the World Bank.
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