By: Staff Writer
January 12, 2024
The Latin American and Caribbean (LAC) region is on target for moderate growth despite global forecasts predicting the worst record for growth in 30 years, says the World Bank.
In the bank’s “Global Economic Prospects,” that Global growth is forecast to slow for the third year in a row in 2024, dipping to 2.4 percent from 2.6 percent in 2023. But, for the LAC, growth is projected to edge up only slightly, while growth is expected to pick up more markedly from below-trend growth in 2023.
The report also said: “Growth in Latin America and the Caribbean is forecast to edge up from 2.2 percent last year to 2.3 percent in 2024 and then to 2.5 percent in 2025. The drag on economic activity from earlier monetary policy tightening is expected to diminish throughout 2024. Additionally, the expected further easing in policy rates amid moderating inflation is set to bolster growth in 2025. Though commodity prices fell last year, they remain at levels that still support economic activity. Improved prospects among major trading partners will also contribute to growth. Most large regional economies are expected to expand at about their potential rate. Risks to the forecast are tilted to the downside. The conflict in the Middle East could result in higher energy prices, which could alter expected monetary policy paths. In addition, tighter global financial conditions could weigh on private demand and accelerate fiscal consolidation in the region. Extreme El Niño weather events related to climate change pose another downside risk.
Global growth is projected to slow for the third year in a row—from 2.6 percent last year to 2.4 percent in 2024, almost three-quarters of a percentage point below the average of the 2010s. Developing economies are projected to grow just 3.9 percent, more than one percentage point below the average of the previous decade. After a disappointing performance last year, low-income countries should grow 5.5 percent, weaker than previously expected. By the end of 2024, people in about one out of every four developing countries and about 40 percent of low-income countries will still be poorer than they were on the eve of the COVID pandemic in 2019. In advanced economies, meanwhile, growth is set to slow to 1.2 percent this year from 1.5 percent in 2023.
The upward revision to LAC’s growth forecast in 2024 reflects stronger external demand due to improved U.S. growth expectations, as well as higher-then-expected government spending. The downgrade to China’s growth is anticipated to have limited effects on commodity prices, and therefore is not projected to substantially affect LAC. More broadly, commodity price changes over the forecast period are expected to be modest, and not a major driver of regional growth.
The report said particularly about the Caribbean, “The Caribbean economies are expected to grow 7.6 percent in 2024 and 5.4 percent in 2025, after expanding 4.6 percent in 2023. Excluding Guyana, which remains in a resource-based boom since the discovery of oil in 2015, the region’s growth is expected to accelerate to 4.1 percent in 2024 and 3.9 percent in 2025. However, pro- spects are uneven across the sub-region. The Dominican Republic is forecast to grow by 5.1 percent in 2024 and 5 percent in 2025, amid structural reforms to attract FDI. In contrast, under an optimistic scenario, Haiti’s growth is expected to recover slowly, reaching only 1.3 percent in 2024 and 2.2 percent in 2025, follow- ing five years of economic contraction. The post- pandemic recovery of tourism in the subregion is incomplete and is expected to continue driving growth
And for Central America, “Growth in Central America is expected to remain broadly steady, at 3.7 percent in 2024 and 3.8 percent in 2025, after an estimated 4.1 percent pace in 2023. As in the Caribbean, moderate remittance growth (except for Costa Rica and Panama) is expected to support activity in 2024.
“Inflation in Central America has eased but remains high, particularly for food. Within the subregion, growth projections differ. Panama’s economy is forecast to expand by 4.6 percent this year, reflecting strong services exports and despite recent shocks from protests, lower copper exports, and the impact of El Niño, while Costa Rica is expected to grow 3.9 percent as domestic demand eases. El Salvador, however, will grow at a more modest 2.3 percent amid slower consumption growth.
The bank also warned about risks to this growth trajectory for the region, particularly the ongoing conflict in the Middle East and what that will do to oil prices. Also, a possible slowdown in the Chinese economy, which will hurt demand for goods and services in the LAC.
More importantly, climate related concerns will continue to loom heavily over the Caribbean and Central American region.
The report added: “Even in the absence of a renewed supply shock, persistent core inflation in advanced economies could result in more restrictive monetary policies than currently priced into financial markets.”