Contrary to what was forecast by some international organizations such as the International Monetary Fund IMF, which projected an expansion of at least 5.1% in the case of the Dominican Republic, the Economic Commission for Latin America and the Caribbean (ECLAC) says that this growth It would be minimal.
Preliminary Balance of the Economies of Latin America and the Caribbean 2024explains that the region’s economies will continue to be mired in a trap of low capacity to grow, with growth rates that will remain low and with a growth dynamic that depends on private consumption, and less on investment.
According to the organization’s report, the projected growth rate for 2024 is of 5.2% and 4.6% by 2025, with an average annual growth in the decade 2015-2024 of 1%which implies a stagnation of GDP per capita during that period.
Recommendations
“To confront the trap of low capacity for growth, it is necessary, on the one hand, to increase the capacity of economies to mobilize financial resources effectively, in order to strengthen resilience against economic fluctuations and, on the other, to strengthen productive capacity. in the medium and long term, through the adoption of productive development policies aimed at increasing productivity, promoting investment in productive capital and generating quality employment“said the Executive Secretary of the commission, José Manuel Salazar-Xirinachs, during the presentation of the report, which he carried out jointly with the Director of the Economic Development Division of ECLAC, Daniel Titelman.
In 2025 South America would grow 2.6%; Central America 2.9%; while in the Caribbean, excluding Guyana, it would grow 2.6%. In this context, the low rate of job creation, high informality and significant gender gaps in the region’s labor markets persist. In line with the low GDP growth, employment in the region also registers limited growth, of 1.7% in 2024, the lowest recorded in the period following the coronavirus disease (COVID-19) pandemic.
Regarding informal employment, the average informal employment rate in the region is expected to be 46.7%, which would mean a decrease of 0.4 points percentages compared to the rate recorded in 2023. Despite this slight reduction in informality, significant challenges persist in the region in terms of formalizing employment, which underlines the need to implement effective policies that promote safer and more stable working conditions. .
On the other hand, after reaching a maximum in 2022, inflation in the economies of Latin America and the Caribbean has shown a downward trend. From the 8.2% recorded that year, median regional inflation decreased to 3.7% in December 2023. It is estimated that in 2024 inflation will continue to reduce to reach 3.4%. Although the median of regional inflation has approached the central value of the target range of many central banks (3.0%), the projected level for 2024 remains higher than the values recorded before the pandemic.
In the fiscal sphere, tax revenues would face difficulties in increasing in the short term, while public expenditures would remain stable in the face of a growing debt service burden. In this way, risks arise for fiscal sustainability, linked to weak GDP growth, high financing costs and exchange fluctuations.
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According to the Preliminary Balance 2024among the main policies to confront the trap of low capacity for growth is the mobilization of financial resources. Internally, the strengthening of public finances is required. This implies concentrating efforts on increasing tax collection and increasing its progressivity, along with reducing levels of tax evasion and carrying out cost-benefit evaluations of current tax expenditures.
