Amid increasing global economic uncertainty, Latin America and the Caribbean are urged to revise their economic strategies, according to the advance chapter of the World Bank's Latin America and the Caribbean Economic Review (LACER). The report anticipates regional growth rates of 2.1% in 2025 and 2.4% in 2026, positioning it as the slowest-growing region globally. The report identifies low investment, mounting debt, and a transforming external environment as primary obstacles.
"The global economic landscape has changed dramatically, marked by higher levels of uncertainty," stated Carlos Felipe Jaramillo, Vice President for Latin America and the Caribbean at the World Bank. "Countries must recalibrate their strategies and advance bold and practical reforms that boost productivity, competitiveness, while tackling long-standing gaps in infrastructure, education, trade, and governance to ensure job creation and better opportunities for businesses and citizens."
The report highlights lingering fiscal deficits as a significant concern, predicting a rise in the debt-to-GDP ratio to 63.3% in 2024 from 59.4% in 2019. The rapid changes in the global economy, coupled with persistent inflation in developed nations, might postpone interest rate reductions and restrict monetary policy options. Global trade restrictions are also raising doubts about nearshoring and market access, contributing to a cautious economic atmosphere. Additionally, the outlook is affected by China's slowing growth and cuts in overseas development assistance.
"Access to technology and exploiting scale economies dictate that trade and FDI remain essential to accelerating growth in Latin America and the Caribbean, even in uncertain times. Diversifying trade destinations, expanding service exports, and pursuing potential nearshoring niches offer opportunities, but will require increasing both productivity and nimbleness. This, in turn, requires progress on long overdue reforms behind the border in business environment, human capital, and innovation," commented William Maloney, Chief Economist for Latin America and the Caribbean at the World Bank.
The forthcoming LACER report also features a chapter examining the social and economic impact of rising crime and violence in the region, to be released on April 28.