The economy of Latin America and the Caribbean will grow by 2,3% in 2024 and 2,5% next year, according to updated World Bank forecasts released on Tuesday (09.1.2024).
The upward revision to the 2024 growth forecast for Latin America and the Caribbean reflects stronger external demand due to improved growth expectations in the United States, as well as higher-than-expected government spending. The downgrade in China's growth is expected to have limited effects on commodity prices and is therefore not expected to substantially affect the region,” the report says. “More broadly, changes in commodity prices over the forecast period are expected to be modest and not a major driver of regional growth,” the specialists added.
The World Bank expects inflation in the region to continue to slow and converge towards national targets by the end of 2024, prompting central banks to cut rates. This could pave the way for a rebound in investment in 2024 and 2025. However, the Bank warns that fiscal policy, i.e. government spending, could negatively impact growth.
Specific projections
Specific projections for countries in the region are mixed. The report noted the following:
- Brazil. The economy will slow to 1,5% in 2024, but will recover to 2,2% in 2025, thanks to lower inflation and interest rates.
- MexicoGrowth is expected to slow to 2,6% in 2024 and 2,1% in 2025 as inflation falls and external demand declines.
- Argentina. The economy is expected to recover by 2,7 % in 2024 and 3,2% in 2025, after the drought of 2023.
- ColombiaGrowth will improve from 1,2% in 2023 to 1,8% in 2024 and 3% in 2025.
- Chile. Growth will be 1,8% in 2024 and then accelerate to 2,3% in 2025.
- Peru. Growth will be 2,5% in 2024 and 2,3% in 2025, supported by increasing mining production.
- Caribbean Sea, with the exception of Guyana which eExperiencing a resource boom with the discovery of oil in 2015, the Caribbean economy is expected to grow by 4,1% in 2024 and 3,9% in 2025, partly due to the ongoing expansion of the tourism sector.
- Central America will grow by 3,7% in 2024 and 3,8% in 2025. This outlook is supported by a moderate increase in remittances, especially in 2024.
Multiple risks
"The projected modest regional expansion is exposed to multiple risks," the World Bank said. These risks include an escalation of the recent conflict in the Middle East, financial tensions, greater persistence of the inflation in advanced economies, trade fragmentation world and disasters related to the climate, which represent threats to agriculture, energy and fisheries. Added to this is a probable slowdown in the Chinese economy, which would negatively affect demand for energy and metals. More recently, the country has emerged as a major consumer of commodities for the transition to green energy.
Faced with weak growth and multiple challenges, the Bank's economists suggest turning to the "global cooperation» to provide debt relief, facilitate trade integration, address climate change and reduce food insecurity. (Global Economic Outlook Report, January 2024)
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