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International News: Latin American Economic Commission projects deceleration in economic growth for region

Posted: Thursday, December 15, 2022. 10:16 pm CST.

By Aaron Humes: Latin America and the Caribbean are set for a deceleration in economic growth, with the Economic Commission for Latin America and the Caribbean (ECLAC) projecting region-wide growth of 3.7 percent for 2022 and 1.3 percent for 2023, falling sharply from the 6.7 percent rate recorded in 2021.

Belize is projected for 9.5 percent growth in gross domestic product (GDP) for 2022 and 5 percent for 2023, with only four Caribbean countries surveyed – Jamaica, Saint Vincent and the Grenadines, Saint Kitts and Nevis and Suriname – expected to record higher growth in 2023 and Trinidad and Tobago remaining the same. Guyana, due to its recent oil finds, grew by a whopping 52 percent in 2022 and is still expected to reach 30 percent growth in 2023.

ECLAC’s Preliminary Overview of the Economies of Latin America and the Caribbean 2022 Report, unveiled by Executive Secretary José Manuel Salazar-Xirinachs found that the monetary policy responses adopted worldwide in 2022, in a context of rising global inflation, have sparked greater financial volatility and increased risk aversion, and have thereby prompted fewer capital flows to emerging economies, including the region’s economies. But the reduction in global inflation expected in 2023 will tend to moderate monetary policy rate hikes by the main central banks, the organization adds.

Things have slowed naturally after the rebound from the pandemic, but there have also been effects from restrictive monetary policies, greater limitations on fiscal spending, lower levels of consumption and investment, and the deterioration of the external context.

The gender gap in labour force participation and unemployment was not contained and an increase in the informal economy and a decline in real wages was observed.

National debt levels continue to be high, which means that fiscal space can be expected to continue conditioning the trajectory of public spending. The risk of interest rate hikes, currency depreciations, and greater sovereign risk are seen hampering the financing of government operations in 2023.

The regional rate of inflation falling in the second half of 2022, coupled with the deceleration in economic activity that is expected to continue next year, will reduce the pressure on monetary authorities in Latin America and the Caribbean to continue raising monetary policy rates.

ECLAC makes recommendations to address challenges for macroeconomic management. It calls for more enforcement of tax collection and review of the structure and improving the efficiency and effectiveness of public spending to enhance fiscal policy and argues that it is critical to stimulate investment and productivity in order to address social demands, the creation of decent employment, to reduce informality, inequality, and poverty, and move forward on climate change adaptation and mitigation. To that end, innovative public policies are needed on productive, financial, trade, and social matters and on the care economy, to avoid another lost decade like the one observed for the 2014-2023 period.

 

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