The Latin American economy will grow 3.2% in 2022, according to ECLAC

The Economic Commission for Latin America and the Caribbean (CEPAL) increased this Thursday to 3.2% its growth projection in the region for 2022, in August it had estimated an advance of 2.7%. Nevertheless, for 2023 it foresees a greater deceleration and locates an average progress of only 1.4%, with the countries of the region subject to important external and internal restrictions.

The UN body highlighted the Impact of the war in Ukraine on global growth and external demand. Like the rest of the world, Latin America and the Caribbean saw how inflationary pressures, volatility and financial costs increased.

In addition, the greater aversion to risk on the part of investors and the tighter monetary policy by the world’s main central banks, affected capital flows to emerging markets, including Latin America.

These factors led local currency depreciations and made financing more expensiveleading to a debt crisis.

Unfavorable weather will persist in 2023

According to ECLAC, in 2023 the international context will continue to be unfavorable for the countries of the region since there would be a slowdown in global growth and trade, with higher interest rates and lower global liquidity.

Fiscal and monetary policies will add complexity to an environment in which central banks have increased interest rates and reduced monetary aggregates to curb inflation.

Although by 2023 the effect of these measures would be felt by stabilizing inflation and, consequently, the monetary policy would change, the The effects of this restrictive period on private consumption and investment will continue to be present throughout the year.

In the tax area public debt levels will remain high in a large number of countries and, since there will be a high demand for public spending, measures will be required to strengthen the fiscal item and increase tax revenue.

subregions

For the subregions, ECLAC estimates a lower growth next year: 1.2% for South America, 1.7% for Central America and Mexico, and 3.1% for the Caribbean, not including Guyana. In 2022, these areas would advance 3.4%, 2.5%, and 4.3%, respectively.

The slowdown in China would affect some South American countries that direct a large part of their exports to the Asian giant. Chile, Brazil, Peru and Uruguay, for example, place more than 30% of their export goods in Chinese markets. Lower commodity prices will also hurt South America, whose high inflation rates have hit real incomes and the effects on private consumption.

The economies of Central America and Mexico, for their part, will suffer in the external sector and domestic consumption from the slowdown in the United States, its main trading partner and main source of remittances. However, the lower prices of raw materials would favor several countries that import food and energy.

Regarding the economies of CaribbeanECLAC indicated that inflation has hit real income and production costs with a negative impact on consumption and the competitiveness of exports of both goods and tourism.