The Economic Commission for Latin America and the Caribbean has cut its growth forecast for the region from 2.7 percent to 2.2 percent. The United Nations regional commission named weaker external demand, less dynamic domestic demand, insufficient investment and limited policy changes as the reasons for the weaker outlook.
But these factors will not impact all countries across the region in the same way due to the heterogeneity of individual economies and their trading partners, the ECLAC Economic Survey 2014 noted.
“Macroeconomic policies have to take into account each country’s specific vulnerabilities. Without a doubt, it is important in all cases to increase investment and productivity to guarantee structural change with equality in the medium term. Both factors are key challenges for the economic sustainability of development, especially in the current context,” said Alicia Bárcena, ECLAC’s executive secretary, during the presentation of the new study.
The growth projections come in lower than last year’s regional GDP of 2.5 percent, but the gradual improvement in some of the world’s major economies will ultimately benefit Latin American and Caribbean economies toward the end of 2014.
Improved economic performance in the U.S., the U.K. and the European Union as a whole should boost some Caribbean economies.
Regional growth this year is expected to be led by Panama, with gross domestic product of 6.7 percent forecast, followed by Bolivia with 5.5 percent and Colombia, the Dominican Republic, Ecuador and Nicaragua, with expansions of 5 percent.
Central America, plus Haiti and the Dominican Republic, are expected to grow 4.4 percent as a region, compared to 1.8 percent expansion in South America. National variations are high, according to the report. While Argentina’s economy is not expected to grow this year, and Venezuela’s GDP should experience a contraction of 0.5 percent, Chile and Peru are expected to expand 3 percent and 4.8 percent, respectively. Brazil, meanwhile, will see a fall in GDP to 1.4 percent from 2.5 percent last year.
The projected 2 percent growth in the Caribbean would constitute a recovery from the 1.2 percent registered in 2013.
The main risk is the lower growth forecast for China in 2014, the report said. Regional economies that are more specialized in exporting commodities to China could be affected if the Asian country’s economy cannot maintain its growth above 7 percent.
In the medium term, the region is expected to face less dynamic demand for its main export goods and more costly external financing.
The report recommends that macroeconomic policy focus on fostering greater investment in public and private infrastructure and innovation and boost the diversification of production.
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