The World Bank forecasts a marked slowdown in Latin America by 2023

The international economic outlook looks complicated and Latin America is no exception: after Europe, it is the region that will grow the least in the world in 2023, according to World Bank forecasts.

In its most recent report “World Economic Outlook” released on Tuesday, the World Bank forecasts that the world economy will grow 1.7% this year and 2.7% in 2024. For Latin America, it estimates that growth will slow down markedly to 1 .3% in 2023, less than half the 3.6% in 2022, to recover to 2.4% next year.

“The crisis facing development is intensifying as global growth prospects deteriorate,” said David Malpass, president of the World Bank Group. “Emerging and developing countries will face several years of slow growth,” he said in a press release.

The forecast for the region represents a downward revision with respect to the WB forecasts for June 2022. At that time, it was estimated that Latin America would grow this year by 1.9%, that is, 0.6 percentage points more than the current forecast.

The forecasts were revealed at a time when there is high inflation, rising interest rates, reduced investment and an impact from the Russian invasion of Ukraine.

The region faces a wide range of challenges: due to its trade links, it is exposed to the slowdown in advanced economies and the weakening of China, which will reduce the rise in exports. In addition, lower commodity prices and tightening financial conditions are expected to impact investment, coupled with persistent inflation, which “remains a major problem,” Philip George Kenworthy, an economist, told The Associated Press. of the WB.

In 2020, due to the impact of the coronavirus pandemic, the Latin American economy fell to levels not seen in more than a century, with a contraction of -6.2%. The following year, in 2021, it recovered and reached a growth of 6.8% that was almost halved in 2022.

The World Bank warned that “given the fragile economic situation” any new adverse event could send the world economy into recession, the first time in more than 80 years with two global recessions in the same decade.

Latin America has the lowest potential growth rate among developing regions and is therefore generally slower as well.

However, “the region’s growth forecast is weak even compared to its own historical averages,” Kenworthy said in responding to a series of emailed written questions. “This reflects expectations of particularly slow growth in some of the region’s largest economies.”

Europe and Central Asia will be the region with the greatest reduction in activity in 2023, at 0.1%, according to World Bank forecasts. In 2024 growth would reach 2.8%. In the Middle East and North Africa it would fall to 3.5% this year; in sub-Saharan Africa it would slow to 3.6% in 2023; in East Asia and the Pacific it would fall to 4.3%; and in South Asia at 5.5%.

In the case of Latin America, the slowdown is also linked to the efforts of the monetary authorities to control inflation.

Among the largest regional economies, the World Bank expects Brazil to grow 0.8% in 2023, Mexico 0.9%, and Chile to contract 0.9%, mainly due to the effect of monetary policies implemented to curb inflation. In addition, the three countries will negatively feel the slowdown of large trading partners such as the United States and China.

Chile also faces challenges related to the prices of raw materials because it exports metals and imports energy, explained the WB economist. Metal prices are expected to fall more this year than energy prices.

In Argentina, meanwhile, growth would fall to 2%, in Colombia to 1.3% and in Peru to 2.6%.

In Central America, on the other hand, growth is expected to fall to 3.2% in 2023 due to the impact of the slowdown in the United States economy on exports and the inflow of remittances.

The WB said that the projections point to a stagnation in the standard of living in the first half of the 2020s, with an average growth of the Gross Domestic Product per capita of 0.6% per year between 2020 and 2024.

“This could make it more difficult to fight a wide range of social problems and would aggravate the obstacles that prevent sustained and inclusive development in Latin America and the Caribbean,” the Washington-based agency warned.

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