The Economic Commission for Latin America and the Caribbean (ECLAC) revised down its growth estimates for gross domestic product (GDP) for the region from 2.9% announced in August to 2.1%, due to a weakening at the level of worldwide, a loss of purchasing power and possible financial instability.
The growth estimate for last year was adjusted upward, from 5.9% to 6.2%.
"The lower growth rate projected for 2022 is explained by several factors that will affect the performance of the countries downward next year," says the report published on Wednesday and signed by its executive secretary, Alicia Bárcena. “From the point of view of the international context in which the region is immersed, lower world growth is expected by 2022 and, with it, less dynamic external demand and lower growth in world trade. Furthermore, commodity prices are expected to remain stable or even somewhat lower than in 2021, ″ says the 176-page report.
The region's largest economy, Brazil, will grow 0.5% this year, the lowest performance, below Haiti, which is expected to grow 1.5%. Meanwhile, Mexico will grow 2.9%, Peru 3%, Colombia 3.7% and Chile 1.9%. The prices of raw materials that countries export, from oil, agricultural products, to metals, are expected to stabilize or see a slight decline, impacting the income of the economies. This means that the recovery projected for this year will depend mainly on domestic demand, since the contribution of the external sector to the growth of the countries' gross domestic product is not expected to be significant.
“The decrease in the growth rates of consumption will intensify from the beginning of next year, in a context in which the recovery of the labor market has been not very dynamic and the increase in inflation will impact disposable income and the expenditure of households ”, says the multilateral report. "Added to this is the uncertainty about the health situation that will still persist in 2022. However, the contribution of consumption will continue to be the main one within spending."
ECLAC also warns of the imminent change in the monetary policy of the Federal Reserve in the United States, which seeks to withdraw the stimuli by raising the reference interest rate.
"It is known that the eventual withdrawal of monetary stimuli by the main central banks would have effects on emerging markets, including Latin America and the Caribbean," says the report.
“How acute these effects are, meanwhile, will depend on the gradualness with which the transition towards a more restrictive monetary policy is carried out by the United States and on how this affects world financial markets and the cost of financing for the region ”, add the specialists.
These are other aspects of the region that the ECLAC report analyzes:
In the first ten months of 2021, 16 Latin American economies recorded depreciation of their currencies against the dollar.
The average depreciation, excluding those economies that suffer from “chronic inflation” such as Argentina and Venezuela, was 5.9%, which shows an improvement compared to the 8.7% registered in 2020. Brazil, Chile, Colombia, Jamaica and Peru they saw their currencies depreciate more than 8% last year.
ECLAC emphasizes that the concentration of vaccines in higher-income countries has been increasing. “These countries concentrate a proportion of vaccine purchase commitments that is higher than the proportion of the world population that they represent. In fact, the European Union, the United States, the United Kingdom, Canada and Japan accounted for 39% of vaccine purchase commitments in November 2021, despite having 12.9% of the world's population ”, he says the organization. “In addition, their vaccination rates are above the average of those in developing and lower-income countries. The ability to vaccinate the population not only has an immediate effect on the control of the pandemic, but also reduces the chances of the emergence of new strains.To the extent that countries have lower vaccination rates, the more difficult it will be to control the pandemic and, therefore, initiate a sustainable and inclusive recovery ”, he adds.
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