Latin America is still facing a situation of economic weakness that will pose a challenge for governments next year. According to a report presented this Thursday by the Economic Commission for Latin America and the Caribbean (ECLAC), the region will continue on its “low growth path” until 2024.
The Preliminary Balance of the Economies of Latin America and the Caribbean 2023 report, the latest report released this year by the United Nations agency, estimates that annual gross domestic product (GDP) will increase by 2.2% by the end of 2023 – a figure above ECLAC's 0.6% in September – but will slow to 1.9% by 2024.
José Manuel Salazar-Xirinachs, the executive secretary of ECLAC, warns that the poor performance of regional activities will influence “the persistence of high levels of informality, large gender gaps and other impacts on the labor market.”
The prospects are familiar at a time when countries face limited fiscal and monetary policy space and an adverse international environment characterized by low growth, low dynamism in goods trade and a persistent – and potentially permanent – increase in financial costs. Daniel Titleman, director of ECLAC's economic development division, said at a news conference.
The preliminary balance confirms a decline in regional GDP per capita due to a sharp decline as a result of the Covid-19 pandemic. Although the indicator has been stagnating since 2015, the economic crisis has exacerbated the decline. According to the ECLAC document's projections, GDP per capita in 2023 will be the same as it was a decade ago.
Despite the panorama, the Santiago de Chile-based organization has clarified that the situation in Latin America is not just due to a “temporary problem” but reflects the decline in the trend growth rate of the regional GDP. Salazar-Xirinachs reiterates that Latin America's performance this year and next is “unfortunately” no longer “mainly due to the consequences of the pandemic”, but rather a “syndrome” of low growth in the region is being observed over a longer period of time.
The executive believes that “it is necessary to scale productive development policies with a focus on dynamic strategic sectors” while “promoting measures to promote public and private investments and adapting the financing framework to improve resource mobilization”.
Although lower annual growth is expected in all subregions in 2023, the report highlights the heterogeneity between Latin American and Caribbean countries. While the GDP of Argentina (-2.5%) and Haiti (-1.8%) is expected to decline this year, the remaining economies will record a moderate increase: Bolivia (2.2%), Brazil (3%) , Chile (0.1%), Colombia (0.9%), Ecuador (1.9%), Paraguay (4.5%), Peru (0.3%), Uruguay (1%), Venezuela (3 %) and Mexico (3.6%).
Furthermore, in struggling economies, the ability to create jobs is slowing. The number of employed people is estimated to rise to 1.4% this year, down 4 percentage points from 5.4% in 2022.
According to the document presented by ECLAC, lower job creation will continue next year. And he adds: “The dynamics that labor markets have shown in the first half of 2023, as well as the estimates for the rest of the year and next year, assume that large gender gaps remain in indicators such as the unemployment rate and labor force participation .”, although these have declined.”