Economic Outlook in Latin America and the Caribbean: Strengthening but with Risks
Positive Outlook
The economic outlook in Latin America and the Caribbean (LAC) is expected to strengthen, supported by more robust household spending and easing monetary policies.
However, according to the United Nations World Economic Situation and Prospects (WESP) 2025 report, the region faces significant downside risks, including domestic political uncertainties and weaker-than-anticipated external demand.
Regional Economic Growth
The report notes that in the Caribbean, excluding Guyana, economic growth is estimated at 2.5 percent for 2024 and is expected to remain unchanged in 2025 as the effects of the post-pandemic rebound in tourism fade.
Although gross domestic product (GDP) growth is significantly above the 0.5 percent average recorded between 2010 and 2019, it remains insufficient to improve living conditions.
GDP growth is projected to remain above 3.5 percent in the Dominican Republic, Guyana, and Paraguay in 2025.
Global Economic Growth
The UN flagship economic report projects that global growth will remain at 2.8 percent in 2025, unchanged from 2024. It said that while the world economy has demonstrated resilience, withstanding a series of mutually reinforcing shocks, growth remains below the pre-pandemic average of 3.2 percent, constrained by weak investment, sluggish productivity growth, and high debt levels.
The report notes that lower inflation and ongoing monetary easing in many economies could modestly boost global economic activity in 2025.
Risks and Challenges
However, uncertainty still looms large, with risks stemming from geopolitical conflicts, rising trade tensions, and elevated borrowing costs in many parts of the world. These challenges are particularly acute for low-income and vulnerable countries, where sub-par and fragile growth threatens to further undermine progress towards the Sustainable Development Goals (SDGs).
“Countries cannot ignore these perils. In our interconnected economy, shocks on one side of the world push up prices on the other. Every country is affected and must be part of the solution, building on the progress made,” said UN Secretary-General António Guterres in the foreword to the report.
“We’ve set a path. Now it’s time to deliver. Let’s make 2025 the year we put the world on track for a prosperous, sustainable future for all.”
Opportunities and Challenges in the Labor Market
The report notes that a vital opportunity for accelerating sustainable development is the potential of critical minerals for the energy transition, such as lithium, cobalt, and rare earth elements, and also for accelerating progress towards the SDGs in many countries.
“For resource-rich developing countries, including several in Latin America and the Caribbean, rising global demand for critical minerals presents a unique opportunity to boost growth, create jobs, and increase public revenues for investment in sustainable development.”
However, the report warns that these opportunities come with significant risks. Poor governance, unsafe labor practices, environmental degradation, and over-reliance on volatile commodity markets could exacerbate inequalities and harm ecosystems, undermining long-term development gains.
Conclusion
The economic outlook in Latin America and the Caribbean is expected to strengthen, but with significant risks and challenges. It is crucial for countries to adopt forward-looking policies and comprehensive regulatory frameworks to drive sustainable extraction, equitable benefit-sharing, and investments in building productive capacities to maximize the development gains from these resources.
FAQs
Q: What is the expected economic growth rate in Latin America and the Caribbean in 2025?
A: The expected economic growth rate in Latin America and the Caribbean is 2.5 percent in 2025, unchanged from 2024.
Q: What are the significant downside risks facing the region?
A: The region faces significant downside risks, including domestic political uncertainties and weaker-than-anticipated external demand.
Q: What opportunities are there for accelerating sustainable development in the region?
A: The potential of critical minerals for the energy transition and accelerating progress towards the Sustainable Development Goals (SDGs) presents a unique opportunity for resource-rich developing countries in the region.