The Economic Commission for Latin America and the Caribbean (ECLAC) forecasts economic growth of 2.7% on a regional average for 2022 against a backdrop of severe macroeconomic restrictions putting pressure on all economies.
Less dynamic growth in gross domestic product (GDP) than expected, as well as a decline in world trade, the appreciation of the dollar and the tightening of global financial conditions are having a negative impact on Latin American countries.
All of this is reflected in particular in the reduction in capital flows (investments), with a 13% drop, while the value of exports/imports and remittances decreases, according to the report “Economic Study of Latin America and Caribbean 2022: Investment Dynamics and Challenges to promote a sustainable and inclusive economic recovery”.
In it, ECLAC announced that the scenario for the region is still “very complex” although it has revised growth estimates up by almost a point compared to last April’s forecast of 1.8%.
According to the report, in addition to strong inflationary pressures, low job creation dynamics, falling investments and growing social demands, there is a global scenario characterized by the war between Russia and Ukraine, which has led to growing geopolitical tensions Has .
Likewise, the world is experiencing lower global economic growth, reduced food availability and rising energy prices, according to the study details. Mario Cimoli, Interim Executive Secretary of ECLAC, stated that “16 of the 33 countries in the region have not recovered their pre-pandemic GDP levels” so the group of Central America and Mexico is projected to grow by 2, 5% will grow to 5.7% in 2021.
In this region, 7% is expected for Panama, followed by Guatemala with 4% and Honduras with 3.8%. Costa Rica could grow 3.3%, Nicaragua 3%, El Salvador 2.5% and Mexico 1.9%.
Bank of Guatemala (Banguat) President Sergio Recinos told Prensa Libre that after 8% growth in 2021, 2022 is expected to be in a range of 3% to 5%, so the interim number is consistent with the provided projections.
Less resource flows
From the third quarter of 2021, the region resumed its position as a net recipient of financial flows (excluding net direct investment) for the first time in two years. However, from the first quarter of 2022, the annual cumulative total shows a decrease of 13% compared to the four previous quarters.
Other indicators slowing its growth are the value of exports, imports and family remittances.
The value of exports is expected to increase by 22% in 2022, below the 28% registered in 2021, and the value of imports by 23%, below the 37% recorded in the previous year.
And after a 27% surge in remittances in 2021, a magnitude not seen in the past decade, growth is expected to continue through 2022, albeit at a more moderate pace. According to the study, the growth rate of remittances in the first months of the year is lower than in 2021 for all countries studied.
growth
According to Daniel Titelman, director of the agency’s economic development division, the projected increase is due only to “adjustments in consumption patterns” and the region is “on the path of the low growth it was showing before the pandemic began.”
Latin America, with 626 million people and considered the most unequal in the world, faced the pandemic at a time of weakness in its economy, with growth barely reaching the 0.1% rate in 2019. After plummeting -6.8% in 2020, the region grew 6.2% last year as a “rebound”.
In the case of Guatemala, the President of Banguat stressed that although economic growth is expected to slow down in 2022, all activities are expected To positive growth. “Economic growth will be supported by domestic demand, trade ties with the United States and prudent economic policies,” he said.
The challenges
Among its conclusions, ECLAC points out that macroeconomic policies to address the economic scenario must promote sustainable growth, aim for price stability, create quality jobs and reduce poverty and inequality.
He also urged public and private investment to be boosted so that it is not subordinated to anti-inflationary policies. “Tax incentives, with an appropriate design and governance framework, allow private investment to be mobilized in strategic sectors. The National Public Investment Systems (SNIP) are important to promote the coherence, efficiency and effectiveness of public investments,” he adds.
“Against a backdrop of multiple objectives and growing constraints, macroeconomic policy coordination is needed to support accelerating growth, investment, reducing poverty and inequality, while counteracting inflation dynamics,” said Cimoli.
In a statement recently published on its website, after attending a panel of investors, the National Competitiveness Program (Pronacom) indicates that this entity is continuing its work to promote the country as an investment destination.
“The investment attraction strategy continues to be a key axis of the Commerce Department’s strategic plan as part of the fulfillment of the economy, competitiveness and prosperity axis of general government policies, which to date has confirmed more than $900 million of investments for the country,” says the publication.