Economic Growth in Latin America and the Caribbean: Challenges and Opportunities

The Economic Commission for Latin America and the Caribbean (ECLAC) projects the region’s growth rate to be two percent this year and 2.4 percent next year. ECLAC, in its “Preliminary Overview of the Economist of Latin America and the Caribbean,” is proposing a series of policies to help the region escape the trap of low growth capacity.

The region’s economies will stay mired in a trap of low capacity for growth, with growth rates that will remain low and a growth dynamic that depends more on private consumption and less on investment. The average annual growth for the LAC region during the 2015-2024 decade was one percent, which implies stagnation of gross domestic product (GDP) per capita during that period.

To tackle the trap of low capacity for growth, it is necessary to increase the ability of economies to mobilize financial resources effectively, to strengthen resilience in the face of economic fluctuations. These policies can be implemented while also strengthening productive capacity in the medium and long term by adopting productive development policies geared towards increasing productivity, fostering investment in productive capital, and creating quality employment.

According to the ECAC document, in 2025, South America will grow 2.6 percent, Central America 2.9 percent, and the Caribbean, without including Guyana, 2.6 percent.

The region’s labor markets continue to be marked by a low pace of job creation, high informality, and significant gender gaps. Because of this low GDP growth, employment in the region also shows limited growth of 1.7 percent in 2024, the lowest rate recorded following the coronavirus disease (COVID-19) pandemic.

Inflation in the economies of Latin America and the Caribbean has been trending downward since peaking in 2022. The median regional inflation rate declined to 3.7 percent in December 2023. It is estimated that in 2024, inflation will continue to ease, reaching 3.4 percent.

Financial resource mobilization ranks among the central policies for tackling the trap of low growth capacity. On the domestic front, public finances must be strengthened. This entails focusing efforts on increasing tax collection and its progressivity, reducing tax evasion levels, and carrying out cost-benefit evaluations of existing tax expenditures.

ECLAC proposes strengthening macroeconomic institutions’ governance and technical, operational, political, and prospective capabilities (TOPP capabilities). Reforming the international financial architecture will also play a central role in boosting resource mobilization capacity in the region.

In productive development policies (PDPs), ECLAC has stressed the need to implement “new-generation” policies to drive productive transformation, which is necessary to escape the trap of low growth capacity.

The report reiterates that ECLAC has identified 14 driving or transformative sectors divided into three categories: industry, services, and key areas for sustainability. These sectors are a priority for Latin American and Caribbean countries since they have a high potential for invigorating growth and productivity.

Conclusion

The Economic Commission for Latin America and the Caribbean has presented a comprehensive report on the region’s economic growth, highlighting the challenges and opportunities that lie ahead. The report emphasizes the need for policy interventions to address the region’s low growth capacity and promote sustainable and inclusive economic development.

FAQs

Q: What is the projected growth rate for Latin America and the Caribbean?
A: The Economic Commission for Latin America and the Caribbean projects the region’s growth rate to be two percent this year and 2.4 percent next year.

Q: What are the key challenges facing the region’s labor markets?
A: The region’s labor markets continue to be marked by a low pace of job creation, high informality, and significant gender gaps.

Q: What is the expected inflation rate in the region?
A: The median regional inflation rate is expected to decline to 3.4 percent in 2024, following a peak of 8.2 percent in 2022.

Q: What are the central policies for tackling the trap of low growth capacity?
A: Financial resource mobilization, strengthening public finances, and implementing productive development policies are among the central policies proposed by ECLAC.