By: Staff Writer
September 8, 2023
The Economic Commission for Latin America and the Caribbean (ECLAC) in a new flagship report, “Economic Survey of Latin America and the Caribbean 2023. Financing a sustainable transition: investment for growth and climate change action,” said that climate shocks will exacerbate the business as usual economic model and lead to continued low growth.
The report said: “the macroeconomic repercussions of climate change on the economies of Latin America and the Caribbean and the potential financial mechanisms for facilitating the investment needed to make economies resilient and drive dynamic, sustained and sustainable growth, is critical to continued development post pandemic.”
The estimations presented by the study suggest that owing to the intensification of climate shocks, by 2050, the gross domestic product (GDP) of six countries of the region that are highly exposed to climate change risks could be between nine percent and 12 percent lower than under a business-as-usual growth scenario. Fully offsetting these economic losses would require an exceptionally large additional investment effort, of between 5.3 percent of GDP and 10.9 percent of GDP per year.
The report also said: “The countries of Latin America and the Caribbean are faced with a complex macroeconomic landscape in 2023. Low economic growth is projected to continue. Although the inflation rate has slowed, it remains above pre-pandemic levels and outside the upper limits set by central banks, which suggests that interest rates will remain relatively high for the rest of the year.
“High public debt levels, together with rising domestic and external interest rates and the decline in tax revenues expected to result from lower economic growth, will likely translate to limited fiscal space for the region as a whole. Forecasts indicate waning job growth, falling investment and growing social demands. This situation presents major challenges for macroeconomic policy, which must boost investment and stimulate sustainable and inclusive economic growth.
“The complex regional context in 2023 is compounded by persistent financial uncertainty and the dampening of growth and trade at the global level.”
Inflation is expected to make this situation worse in 2024 and despite it letting up, global inflation is expected to remain above the 3.6 percent averaged in the decade prior to the pandemic (2010–2019), with rates of 6.8 percent and 5.2 percent projected for 2023 and 2024, respectively. “The major developed economies are maintaining their tight monetary policy stance, with interest rate hikes and a reduction in global liquidity.”
The report added: “Regional growth figures for the first quarter of 2023 not only confirm the year-on-year economic slowdown but also reveal that GDP has flatlined in the past four quarters. Year-on-year GDP growth slowed by 0.5 percentage points in the first quarter of 2023. This widespread deceleration was borne out in 13 of the 16 countries that published economic indicators for the quarter.
“In 2022, the post-pandemic recovery in the region’s labour markets continued, as shown by indicators such as the participation rate, the unemployment and employment rates, and the number of persons employed. However, in the first quarter of 2023, the pace of recovery in labour participation stagnated in the 14 countries of the region that report this indicator, stalling at around 62.8 percent since the third quarter of 2022, below the 63.4 percent recorded in the fourth quarter of 2019.”