On Tuesday, ECLAC improved its growth forecast for Latin America to 2.7% from the previously estimated 1.8%, despite a very complex scenario of slowdown and inflation, which will deepen in the second half of the year.
The global scenario of low growth and rising prices “together with lower growth in trade, the appreciation of the dollar, and the tightening of global financial conditions (ndlr: rise in interest rates), will negatively affect the countries of the region” explained the Economic Commission for Latin America and the Caribbean (ECLAC).
Daniel Titelman, director of Economic Development of this technical organization of the United Nations, stated at a press conference that the region is in a “very difficult situation” because “it is returning to a trend and a path of low growth that has already It was observed before the pandemic with great force.
“This low growth dynamic is being accompanied by inflationary pressures and high inflation rates that generate a very complex challenging situation for macro (economic) policy,” said the ECLAC expert.
The slowdown process began to become evident after the 6.5% growth registered in 2021, mostly driven by a strong recovery in services after the worst part of the covid pandemic.
But now the adverse international scenario is added with the war between Russia and Ukraine, a conflict that “has generated a lower availability of food and increases in the price of energy that have increased the inflationary pressures that have been produced as a result of supply shocks generated by the pandemic,” he explained.
The uncertainty about the duration of the conflict has increased the volatility of the financial markets, “generating more onerous conditions to access financing, which harms the countries of the region,” according to ECLAC.
After the end of the post-pandemic recovery and due to the war in Ukraine, ECLAC expects “an intensification of the slowdown” in growth in Latin American countries for the second quarter.
Resilient consumption
The persistence of more resilient consumption dynamics explains for ECLAC the slight improvement in its growth estimates compared to the previous ones published in April.
“The bulk of the countries more or less remain the same in their growth dynamics and there are some countries (in) where, especially in the first quarter, consumption was a little more resilient than we all expected” and, in addition, “Investment was falling but it has fallen a little less quickly than we all expected,” Titelman summed up.
Even so, 16 of the 33 countries monitored will not be able to recover their pre-pandemic level of GDP growth by the end of 2022.
“There is going to be a high heterogeneity in the growth rates of the countries in the region,” Titelman said.
ECLAC projects a growth of 2.6% for South America, with Venezuela in the lead (10%).
For Central America, the estimate is 4.1%, with Panama having the best numbers (7%), while the Caribbean is expected to grow 10.2%, although this subregion reaches 4.7% if Guyana is excluded ( 52%).
To face this new slowdown cycle, ECLAC considers that “it is urgent to boost investment.”
“The macroeconomic policy must boost sustainable growth, seek price stability, generate quality employment, reduce poverty and inequality,” the agency said.
