Growth slows in Latin America and the Caribbean

The highly uncertain international context, generated by rising interest rates worldwide, the war in Ukraine and weak growth in international trade, is weighing on the South American economy.

The Economic Commission for Latin America and the Caribbean (Cepal), which has just updated its forecasts, expects the slowdown to deepen in the region in 2023 to reach a GDP increase of 1.2% .

Infographic Le Figaro

Countries will face tight monetary and fiscal policy space this year.

Admittedly, like the rest of the world, inflation is on a downward trend and the rise in interest rates "should soon come to an end", but the effects of this harmful policy on private consumption and investment “will be felt more strongly this year because of the lag time with which monetary policy acts,” writes Cepal.

The United Nations regional commission further estimates that all sub-regions will experience a downturn.

The decline is severe in South America (+0.6% in 2023 against 3.8% last year), weighed down by the recession in Argentina, which has been facing very high inflation for months.

Also in question is the poor performance of Brazil,

Impact of inflation

South America as a whole, rich in mining, agricultural and energy resources, should be affected by the fall in commodity prices and the limited room for maneuver available to the public authorities to support activity.

High inflation has had a major impact on real income which feeds through to private consumption and investment.

In the Caribbean, rising prices are the main cause of the slowdown.

This negatively impacts competitiveness on goods exports and tourism.

Cepal, on the other hand, raised its forecast for the Central America and Mexico zone, forecasting 2%, supported by growth in the United States, the main trading partner and the main source of remittances.

In addition, lower energy prices, expected in 2023 compared to 2022, should “have a favorable effect” knowing that several of these economies are net importers of energy.