SANTIAGO, Chile, CMC—The Economic Commission for Latin America and the Caribbean (ECLAC) has revised its growth projection upwards for the economies of Latin America and Caribbean (LAC) countries in 2024.
According to the new estimates, ECLAC forecasts that the region will grow by 2.1 percent on average this year, with South America growing by 1.6 percent, Central America and Mexico by 2.7 percent, and the Caribbean, excluding Guyana, by 2.8 percent.
It said that the region’s expected expansion in 2024 continues on the path of low economic growth observed in recent years, and the major challenge is how to move towards higher, more dynamic, and inclusive growth.
The UN Commission says the region is facing a complex international scenario characterized by growth in economic activity and global trade that is below their historical averages. Interest rates remain high in developed countries, resulting in higher financing costs for emerging countries, including those in the region.
It notes in the domestic arena, the downward trend in inflation has created space for various countries’ central banks to reduce their policy interest rates, generating expectations for a potentially favorable impact on economic activity.
ECLAC said in 2024, various risk factors will mark global markets.
Growing geopolitical tensions are leading the world towards a sharp realignment of value chains. In addition, increases in commodity prices could delay the reduction of policy interest rates by the leading central banks, with negative effects on global economic growth.
Moreover, if interest rates remained high for more time, they could further increase the vulnerabilities linked to the debt burden that affects numerous emerging and developing economies and the vulnerability of the financial sector in developed countries.
ECLAC had previously indicated that the low growth foreseen in 2024 is not just a circumstantial problem but reflects a decline in the trend growth rate of regional gross domestic product (GDP).
It said the region is experiencing a development crisis characterized by three mutually reinforcing traps:
- A trap of low-growth
- A trap of high inequality and low social mobility
- A trap of low institutional capacity and ineffective governance
These traps constrain and limit the achievement of the United Nations’ 2030 Agenda and, therefore, inclusive social development.
To invigorate growth, ECLAC has insisted that the region increase its productivity and boost investment in physical and human capital.
”To that end, the region must invest more and better. This involves adopting new technologies, promoting cluster initiatives and best business practices, fostering profound improvements in capital accumulation, and taking suitable advantage of economies’ social and environmental capital,” ECLAC said.
ECLAC has also identified a portfolio of at least 15 sectors driving or dynamizing for more sustainable and inclusive growth.
It said the region needs to invest in diverse areas critical for increasing productivity, infrastructure, telecommunications, digitalization, research and development, significant improvements in health programs, and adaptation of education systems to respond to the changes that digitalization and automation entail for labor markets.
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