The Economic Commission for Latin America and the Caribbean (ECLAC) made a slight upward revision to its growth projection for the region’s economies in 2024.
According to new estimates released today, the United Nations organization forecasts that the region will grow by 2.1 per cent on average this year, with South America growing by 1.6 per cent, Central America and Mexico by 2.7 per cent, and the Caribbean (excluding Guyana) by 2.8 per cent.
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 indicates.
The region is facing a complex international scenario, characterized by growth in economic activity and global trade that is below their historical averages, along with interest rates that remain high in developed countries, resulting in greater financing costs for emerging countries, including those in the region.
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.
In 2024, global markets will be marked by various risk factors, ECLAC indicates. Growing geopolitical tensions are leading the world towards a sharp realignment of value chains. In addition, there is a risk that increases in commodity prices could delay the reduction of policy interest rates by the main 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 affect numerous emerging and developing economies, as well as the vulnerability of the financial sector in developed countries.
As ECLAC has indicated previously, the low growth foreseen in 2024 is not just a circumstantial problem, but rather reflects a decline in the trend growth rate of regional GDP. 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, and a trap of low institutional capacity and ineffective governance. These traps constrain and limit the attainment of the United Nations’ 2030 Agenda and, therefore, the attainment of inclusive social development.
To invigorate growth, ECLAC has been insisting that the region must increase its productivity and boost investment in physical and human capital. To that end, the region must invest both more, and better. This involves adopting new technologies, promoting cluster initiatives and best business practices, fostering deep improvements in the process of capital accumulation, and taking suitable advantage of economies’ social and environmental capital.
ECLAC has also identified a portfolio of at least 15 driving or dynamizing sectors for more sustainable and inclusive growth. The region needs to invest in diverse areas that are critical for increasing productivity, infrastructure, telecommunications, digitalization, research and development, significant improvements in health programs, and an adaptation of education systems to respond to the changes that digitalization and automation entail for labor markets.
