SANTIGAO, Chile, Friday December 17, 2015 – Latin American and Caribbean economies will contract 0.4 per cent on average in 2015 and will grow just 0.2 per cent next year, according to new projections unveiled today by the United Nations’ Economic Commission for Latin America and the Caribbean (ECLAC).
ECLAC’s annual report, ‘Preliminary Overview of the Economies of Latin America and the Caribbean 2015’, updates the estimates given in October and calls on the region’s countries to invigorate economic growth through greater investment and higher productivity.
While Central America will grow around 4.3 per cent in 2016, South America will see its GDP shrink 0.8 per cent, mainly due to the expected contractions in Brazil (-2 per cent) and Venezuela (-7 per cent). Meanwhile, the English-speaking Caribbean will grow 1.6 per cent.
According to ECLAC’s projections, Panama will lead regional growth next year with an expansion of 6.2 per cent, followed by Dominica and the Dominican Republic (5.2 per cent), St. Kitts and Nevis (4.7 per cent) and Bolivia (4.5 per cent). It is expected that Nicaragua will grow 4.3 per cent, Cuba 4.2 per cent, Guatemala 4.0 per cent, Peru 3.4 per cent, Costa Rica and Honduras 3.3 per cent, Colombia and Paraguay 3.0 per cent, Mexico 2.6 per cent, Haiti 2.5 per cent, El Salvador 2.4 per cent, Chile 2.1 per cent, Uruguay 1.5 per cent, Argentina 0.8 per cent and Ecuador 0.3 per cent.
“It is necessary to resume growth and reverse the contractionary investment cycle in a context of slow global recovery and a decline in trade,” Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC) Alicia Bárcena said yesterday at a press conference where the document was presented.
She noted that the agreements reached at the recent Conference of the Parties (COP21) of the United Nations Framework Convention on Climate Change held in Paris would enable countries to provide incentives to innovation and investment in new sources for the production of renewable energy, which has huge potential in the region.
“In the current context, active fiscal policies to promote smart adjustments gain greater relevance: analyzing the level of public spending as well as its composition to avoid excessive cuts to public investment and social spending; reviewing the structure of fuel subsidies and tax incentives in order to strengthen instruments for promoting investment and financing social spending; and reducing tax evasion/avoidance, which on average is equivalent to 6.3 points of regional Gross Domestic Product (GDP), or US$320 billion,” Bárcena added.
According to ECLAC’s report, the region will have to face diverse scenarios and risks related to the global economy in 2016, which will undoubtedly condition its economic performance. On the external front, global growth is forecast to remain slow and reach 2.9 per cent, while uncertainty persists regarding China—one of the region’s main trading partners—which will continue decelerating to 6.4 per cent.
Compounding uncertainty over the global economy is low growth in international trade (1.5 per cent in 2015 and 2.5 per cent forecast for 2016). In addition, the prices of the commodities that the region exports will stay low, meaning that Latin America and the Caribbean will once again suffer a deterioration in its terms of trade in 2016, especially in countries that export hydrocarbons and minerals, the document states.
In financial terms, ECLAC explains that the volatility and uncertainty observed in 2015 will continue next year, which means that some emerging economies will still have difficulty obtaining resources in international markets. On top of that, there will be impacts from the steady appreciation of the dollar and the rise in United States interest rates.