According to its most recent economic outlook, the new projection represents a downward adjustment compared to previous ones. This is mainly explained by the forecast on Argentina, whose economy is estimated to contract this year before resuming growth in 2025.
The World Bank has published its most recent economic outlook for Latin America and the Caribbean (LAC), projecting a slowdown in the region's economic growth. According to the report, GDP growth is expected to decelerate from 2.2% in 2023 to 1.8% in 2024, before rebounding to 2.7% in 2025. These figures represent a downward revision compared to previous projections, mainly due to a downward revision for Argentina, whose economy is expected to contract this year before resuming growth in 2025.
The risks to this projection are predominantly negative. Tighter-than-anticipated global financial conditions, as well as elevated local debt levels, could impact private demand and require accelerated fiscal consolidation in the region. A further slowdown in China's growth could affect LAC exports, especially from South America.
Extreme weather events related to climate change also represent a downside risk.
However, there are factors that could boost regional growth, such as stronger-than-expected activity in the United States, particularly beneficial for Central America and the Caribbean.
The World Bank growth projections for each country in the region reveal varied economic conditions. In the case of Argentina, a contraction of 3.5% is anticipated for 2024, followed by a projected growth of 5% in 2025. In Brazil, moderate growth of 2% is expected in 2024 and 2.2% in 2025. Colombia has a growth projection of 1.3% in 2024, with a solid expected expansion of 3.2% in 2025. Chile estimates indicated growth of 2.6% in 2024 and 2.2% in 2025, while for Peru forecasts are 2.9% in 2024, followed by a slight deceleration in 2025, to 2.6%. Finally, the Caribbean region shows a growth forecast of 7.1% in 2024, followed by solid growth of 5.7% in 2025.
On the other hand, although some indicators suggest an improvement in economic activity in early 2024, this recovery has not been widespread throughout the region. While Brazil and Mexico show positive business confidence, the later has recovered in Colombia and is starting to do so in Argentina after a deterioration in the early part of the year. However, economic activity in Argentina continues to show contraction, except in the agricultural sector.
Regarding inflation, most countries have seen declines, although at a slower pace. The exception is Argentina, where monthly inflation has increased significantly in early 2024, although it is expected to decrease in the coming months.
In terms of monetary policy, most central banks have reduced their interest rates in response to the economic slowdown and falling inflation. These reductions are expected to continue, which could support consumption and private investment in the coming years.
In sum, the economic outlook for Latin America and the Caribbean is challenging, with significant downside risks. However, there are opportunities for growth, especially if positive events materialize in advanced economies and stabilization is achieved in the region.
