The Latin American economy will grow 1.3% this year, according to the World Bank

People in the local market in Suárez, Colombia, on August 7, 2022. JOAQUIN SARMIENTO / AFP /Getty Images) (AFP via Getty Images)

The post-covid 19 economic recovery has ended and now, Latin America swims against the current.

This year, the countries of the region will feel the fall in consumption in the two largest economies in the world, the United States and China, for which growth will slow down, the World Bank said on Tuesday.

The region will grow 1.3% this year and 2.4% in 2024.

"This slowdown reflects both the efforts of the monetary authorities to control inflation and the secondary effects of an inauspicious world outlook," the multilateral specialists have pointed out in their global outlook report.

"Somewhat slow growth in the US and China is expected to dampen export demand, while rising US interest rates are likely to mean financial conditions will remain tight," the text added.

“Projections indicate that slow global growth will affect commodity prices, weakening South America's terms of trade.

According to the forecasts, regional investment will decrease this year as a result of the increase in financing costs, low business confidence and strong regulatory uncertainty, "says the multilateral.

In the largest economies in the region, Brazil, Mexico and Argentina, the World Bank expects GDP to grow less than this year.

In Chile, the multilateral estimates a contraction of 0.9% of GDP this year.

In Peru, one of the countries with the highest average growth in the last decade, the economy will suffer the impact of the political instability that the country has been going through since its former president, Pedro Castillo, failed in an attempted coup.

"Strong regulatory uncertainty and the decline in metal prices will slow down growth, which is projected at 2.6% for 2023," the bank says of Peru.

The multilateral forecasts that growth in Central America will fall to 3.2% in 2023, “as the slowdown in the US economy reduces exports and the inflow of remittances.

On the other hand, in the Caribbean a firmer expansion is expected, of 5.6%, but this will partly reflect a long-delayed recovery after the recession caused by the pandemic, ”says the report.

After years of fighting against external inflationary shocks, derived from the disruption of supply chains in Asia and economic stimuli in developed countries, 2023 will be a year in which the region's central banks fight against internal inflation.

This could be more persistent than expected, the bank says, so it is possible that some central banks in the region will continue raising interest rates, which could dampen economic activity.

“More broadly, projections point to stagnant living standards in the first half of the 2020s, with GDP per capita growing on average 0.6% per year between 2020 and 2024. This could make it more difficult to fight a wide range of social problems and aggravate the obstacles that prevent sustained and inclusive development in Latin America and the Caribbean”, says the World Bank.