World Bank: “We are not forecasting a recession so far”

The macroeconomic forecast for Latin America for this year and next is far removed from the historical growth recorded in 2021, after the ravages of the pandemic. Despite this, the head of the Latin America and Caribbean region at the World Bank Group, William Maloney, assured the voice of america that a recession as such is not being forecast.

“So far we are not forecasting a recession, what we are looking at is 1.6% growth for next year. Some countries more, some countries less,” Maloney said.

And, although he says he understands the concerns in the region, his biggest concern is not whether, for the years to come, the numbers go up and down, but that they remain low.

“As a region, what is happening in the next 12 months is important and I fully understand why we are so concerned about that. However, what worries me about 2024 is not that it is above or below 2023. It is that it is low; 3% is not enough to alleviate poverty or reduce social tensions, and that growth rate is more or less what we experienced during the 2010s, when as a region we grew by about 2.3%, while the world grew by 3.1%”.

In this sense, he confesses that there are structural problems in the region that must be attacked.

Factors ‘out of control’

For Maloney, there are many factors that are not in favor of a “healthy economy.”

“China is growing super slow due to its policy of controlling COVID. Obviously, the countries of Europe, with the increase in fuel prices, with the war in Ukraine, all of this is very difficult and will slow down growth. The United States is in the process of curbing inflation and this has carried out a fairly strong increase in interest rates, in a very short period, ”says the World Bank.

Although he confesses that it is hoped that high interest rates can be ended, it is a difficult situation to meet in the short term.

Help in the region

Maloney also stated to the VOA that the bank is helping with transfers to families and counseling.

“We have precisely [que] look at how to protect the most vulnerable families from these two shocks, not only the drop in the economy, in economic activity, but also in the increase in fuel and food prices that make up a large percentage of the family budget.”

The head of the Latin American and Caribbean region at the World Bank Group explained that many countries are subsidizing the price of fuel and food in the long term, but that it is not optimal because it is equivalent to a lot of money and that it is best to generate policies focused on families who need the resources.

According to him, the governments of Latin America have established anti-inflationary policies, with increases in interest rates: “All governments are struggling with fiscal deficits, which come from the pandemic. They did exactly what they had to do at this time, which was to minimize the damage to businesses and households in the pandemic, but obviously this left us with some deficits and more debt [de la] that we had before”.

The future

For Maloney, by 2024, the World Bank forecasts 2.3% growth, but points out that many factors can be included to change the course: “If the war in Ukraine is resolved, this relieves a lot of inflationary pressure, and the economy of Europe can grow more. If China is able to defeat COVID, it can grow again. And if, as we forecast, inflation is brought under control, monetary and fiscal policy can also be loosened a bit.”

All the central banks, in the region and the world, says Maloney, have found a level of inflation that they believe is acceptable in the long term for their economies to grow well. So, in the medium and short term, “what we are looking for is for us to return to those levels, and we have to do it. In the short term, this implies that we grow less, but we have to lower inflation to the goals”.

​[Colaboró en la redacción Luis Felipe Rojas]

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