ECLAC raises forecast for Latin America in 2022, but says that growth will be low

By: News Team

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ECLAC on Tuesday increased its growth projection for Latin America and the Caribbean in 2022 to 2.7%, driven by domestic consumption, but signaled that the region will return to the weak expansion of before of the pandemic due to a complex scenario due to the war in Ukraine and the monetary and fiscal tightness.

The Economic Commission for Latin America and the Caribbean (ECLAC) had forecast in April that the regional economy would grow 1.8% this year -compared to the estimate of 2.1% projected in January- after the rise of 6.5% last year.

According to ECLAC “the adjustment in activity projected for 2022 occurs with a marked difference between the behavior of private consumption and investment. Private consumption remains the component with the greatest contribution to GDP growth, although its contribution is reduced in half compared to 2021”.

Despite the improvement in expansion expectations, the lower dynamism compared to 2021 “is the result of both the end of the post-pandemic recovery and the aftermath left by the pandemic crisis, as well as the negative effects of the war in Ukraine”, said the United Nations body.

The effects of the conflict have deepened the economic slowdown, he emphasized, “which adds to the growing limitations faced by domestic macroeconomic policy to boost growth.”

In its Economic Study of Latin America and the Caribbean report, ECLAC stated that although some countries in the region -especially net energy exporters- have benefited from the high price of these products, in most nations they are recording falls in the terms of trade together with a slowdown in exports.

In addition, more restrictive financial conditions in international markets and investors’ greater aversion to risk are affecting financial flows to the region, as well as the cost of borrowing.

“In the domestic context, inflationary pressures have been intensified by the increase in the price of food and energy, which has led the monetary authorities to accelerate the increases in monetary policy rates,” the report stated.

The prices of these items have registered an increase that has not been seen since 2008, said ECLAC. For its part, the region’s average inflation in June this year was 8.4%.

According to the report, Brazil’s GDP would grow 1.6% this year and Mexico’s 1.9%, while Argentina’s and Colombia’s would expand 3.5% and 6.5%, respectively.

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