Latin America and the Caribbean will grow less than expected this year, according to World Bank (WB) projections published on Tuesday. The region’s Gross Domestic Product (GDP) will grow 1.8% this year, 0.5% less than anticipated in January, when the multilateral published its latest forecasts. This would represent a slowdown compared to the 2.2% growth experienced last year. The forecast for 2024 has been revised downwards due to a “marked lowering” of expectations for Argentina, whose economy is expected to contract this year before resuming growth next, the WB reported.
Tighter-than-anticipated global financial conditions, as well as high levels of local debt, could affect private demand and require accelerated fiscal consolidation in the region. The bank also warned that a further slowdown in growth in China could hurt exports. Another negative risk for Latin America is extreme weather events related to climate change. On the other hand, greater than expected activity in the United States could boost regional growth.
“While the Latin American and Caribbean region will face economic difficulties in 2024, it is expected to show a gradual recovery in 2025, supported by declining inflation and an accommodative monetary policy,” bank specialists wrote in a report on Monday. . “The region’s economic performance will depend on a combination of domestic and international factors, and commodity prices and global demand will play a moderate role in this outlook,” they added. The economy will rebound in 2025 with an estimated increase of 2.7%, as interest rates normalize and inflation falls.
Not all countries in the region have been able to lower interest rates, because inflation has remained high. This negatively impacted growth, which slowed in the second half of last year. While business confidence has been maintained in Brazil and Mexico, in Colombia it has not fully recovered and Argentina has had a strong economic contraction.
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