By: Staff Writer
May 31, 2024
A United Nations Economic Commission for Latin America and the Caribbean (ECLAC) report that fiscal deficits widened across the LAC as economies began to falter due to international tensions and increases in financial costs.
The “Fiscal Panorama, 2024” released this May, said: “In 2023, public finance trends in Latin America and the Caribbean were framed by faltering economic growth, a reduction in the international prices of non-renewable natural resources, an increase in financial costs and rising geopolitical tensions. In Latin America specifically, the public accounts deteriorated as public revenue flows lost momentum, with tax receipts retreating from their 2022 peak. In contrast, public expenditure remained stable following two consecutive years of cuts. Interest payments played an important role in this result, particularly those related to variable-rate external debt. As a result of these trends, the overall central government deficit widened to 3.1% of GDP in 2023, compared to 2.2% of GDP in 2022. Meanwhile, the primary balance turned negative, posting a deficit of 0.4% of GDP in 2023, following the previous year’s 0.3% of GDP surplus.
“Central government gross public debt increased during the year to the equivalent of 55.0% of GDP in December 2023. Although the denominator effect of higher nominal growth rates served to lower debt levels between 2021 and 2022, the slackening of activity and higher financial costs in 2023 have diluted this effect in several countries.”
For the Caribbean, the report said: “The Caribbean was not immune to the macroeconomic fluctuations that weighed on public accounts across the region. Public income in this subregion also declined, owing mainly to a reduction in revenues from non-renewable natural resources. Nonetheless, tax receipts strengthened in service-exporting countries as international tourism returned to normal. At the same time, public spending continued to trend down in the wake of smaller outlays on programmes related to the coronavirus disease (COVID-19) pandemic and anti-inflationary measures adopted in 2022. The countries are facing significant pressures to reduce primary expenditure and thus generate the surpluses needed to control the trend of public debt. In this context, the overall balance recorded a deficit of 1.6% of GDP in 2023, compared to the previous year’s 2.4% of GDP, while the primary surplus increased to 1.4% of GDP, compared to 0.3% of GDP in 2022.
It added: “At the same time, the level of debt in the Caribbean declined, as the central government’s gross public debt fell by 5.4 percentage points from its end-2022 level to 70.5% of GDP in December 2023. While this reduction has restored the public debt to its pre-pandemic level, it remains high, not only relative to Latin American countries but also compared to other regions with similar income levels.”