Durrant Pate/Contributor

The Economic Commission for Latin America and the Caribbean (ECLAC) is predicting minimal economic growth in the region in 2024, with Guyana being the only exception.

In fact, ECLAC is projecting that Guyana’s spectacular growth over the past four years will continue with more than 25 per cent of this expansion to be fuelled mostly by revenues from its blossoming oil and gas sector. ECLAC, in its latest economic report for the current year, projects that growth for 2023 will amount to 2.2 per cent, but will drop to 1.9 per cent in 2024.

ECLAC is one of the five regional commissions of the United Nations established in 1948 with the purpose of contributing to the economic development of Latin America and the Caribbean. It is also charged with the responsibility of coordinating actions directed towards this end whilst reinforcing economic ties among regional countries and with other nations of the world.

The report titled, “Preliminary Overview of the Economies of Latin America and the Caribbean”, which was recently released, indicates that the region will stay on a path of low growth, which means job creation will decelerate and informality and gender gaps will persist, among other effects.

Anaemic growth projected

According to ECLAC, “Latin America and the Caribbean remains on a low-growth path, with an estimated year-on-year variation in GDP of 2.2% in 2023. All the sub regions will post lower growth in 2023 than in 2022: South America is set to grow by 1.5% (3.8% in 2022); the group comprising Central America and Mexico by 3.5% (4.1% in 2022); and the Caribbean (excluding Guyana) by 3.4% (6.4% in 2022).”

Although all the subregions will have lower growth in 2023 than they did in 2022, the report emphasises the heterogeneity among countries in the region. South America is seen growing by 1.5 per cent (versus 3.8% in 2022); the group made up of Central America and Mexico by 3.5 per cent (4.1% in 2022); and the Caribbean (excluding Guyana) is forecast to grow 3.4 per cent (6.4% in 2022).

“In 2024, it is expected that the region will maintain this dynamic of low growth and all the subregions will grow less than in 2023: South America is seen expanding by 1.4%; Central America and Mexico by 2.7%; and the Caribbean by 2.6% (without including Guyana),” the report stated.

These projections reflect, in part, low dynamism in economic growth and global trade, which translates into a limited impetus from the global economy. Although inflation has declined, the interest rates of the main developed economies have not, which means that financing costs have remained at high levels throughout the year and they are expected to stay that way in coming years.

Furthermore, ECLAC says this low growth is also attributable to the limited domestic space for fiscal and monetary policy faced by regional countries. The commission says while public debt levels have declined, they remain high, and this – coupled with the increase in financing costs – restricts fiscal space.

In the monetary arena, inflation continues to decline in the region, but monetary policy still has a restrictive bias, due to the effects that rate cuts could have on capital flows and the exchange rate, given that high interest rates are still in effect in developed countries. In 2023, it is forecast that average inflation in the region will finish the year at 3.8 per cent, far below the 8.2 per cent recorded in 2022.

In 2024, that decline will continue, with the average regional inflation rate estimated at 3.2 per cent, according to the report. ECLAC estimates that the number of employed persons will have grown 1.4 per cent in 2023, which points to a four-percentage point drop from the 5.4 per cent recorded in 2022.

Escaping low-growth trap

This lower rate of job creation is seen continuing in 2024, when the number of employed persons is projected to grow by just 1.0 per cent. To escape the low-growth trap, “it is necessary to escalate productive development policies with a focus on strategic, dynamic sectors, carry forward policies to promote public and private investment, and adjust the financing framework to enhance resource mobilization,” José Manuel Salazar-Xirinachs emphasised.

In its Preliminary Overview 2023 report, ECLAC calls for complementing productive development policies with macro and financial policies that would allow for proper management of the financial and foreign-exchange risks faced by the region, and would stimulate domestic resource mobilization to expand fiscal space and increase investment and productivity. Likewise, policies are needed that would enable greater inclusion and reduction of the significant inequalities that characterize the region, among them gender inequalities.

Furthermore, ECLAC indicates that reforms to the international financial and tax architecture are needed to enable regional countries to achieve the Sustainable Development Goals, by directing resource mobilisation towards the region.