The Economic Commission for Latin America and the Caribbean (ECLAC) has lowered its growth projections for Latin American and Caribbean economies in 2014.
In its new report, “Economic Survey of Latin America and the Caribbean 2014”, released last month, the United Nations commission said the region will experience average growth of 2.2 per cent in 2014, down from its previous estimate of 2.7 per cent.
There is some good news for Trinidad and Tobago in the report.
“Economic growth in Trinidad and Tobago continues to rebound from the negative and negligibly positive rates seen during the period 2009-2011. Estimates indicate that the economy grew by 1.6 per cent in
2013, up from the 1.2 per cent recorded in 2012, and a figure of two per cent is projected for 2014,” the survey said.
The region is being affected by weakness in external demand, less dynamic domestic demand, insufficient investment, and limited room for implementing policies to spur an upturn, the survey found.
“These elements have a differentiated impact on Latin American and Caribbean countries and sub-regions, confirming a high degree of heterogeneity in growth dynamics,” ECLAC stated, adding that it cut the regional growth forecast for 2014 of 2.7 per cent that was issued last April.
“The study indicates that the economic slowdown observed in the last quarter of 2013 persisted during the first months of 2014, meaning that the region will grow less than it did last year (2.5 per cent). Nevertheless, the report signals that a gradual improvement in some of the world’s major economies should enable the trend to change towards the end of 2014,” ECLAC said.
“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 document.
On a regional level, 2014 growth will be led by Panama, with an increase in its Gross Domestic Product (GDP) of 6.7 per cent. That country will be followed by Bolivia (5.5 per cent) and Colombia, the Dominican Republic, Ecuador and Nicaragua, with expansions of 5.0 per cent.
The Central American Isthmus plus Haiti and the Dominican Republic is expected to grow 4.4 per cent, while South America will expand 1.8 per cent, although with great diversity among countries.
The Caribbean will grow 2.0 per cent, which implies a recovery from the 1.2 per cent registered in 2013.
The reduction in estimated growth for 2014 responds to different factors, depending on the country being analysed, the document states. In the cases of Argentina-whose GDP will barely grow this year-and Venezuela-which should experience a contraction of -0.5 per cent-the available data for the early months of the year reflects the impact of some imbalances that have been manifesting themselves in recent years.
In Chile and Peru, which will expand 3.0 per cent and 4.8 per cent, respectively, the decline in economic dynamism is linked to lower levels of investment and a deceleration in household consumption.
In Mexico, a rebound in growth is expected (2.5 per cent compared with 1.1 per cent in 2013), although the rate will be lower than previously forecast (3.0 per cent), while Brazil will undergo a smaller annual expansion of 1.4 per cent, compared to 2.5 per cent last year.
According to ECLAC’s analysis, the resumption of economic growth in the United States will benefit Mexico and Central American countries, while the recovery of the United Kingdom and several economies in the euro zone will have a positive impact, especially in the Caribbean, due to the arrival of more tourists.
The main risk is the lower growth forecast for China in 2014, the report emphasised.
“The regional economies that are more specialised in exporting commodities to that country could be affected if the Asian giant cannot maintain its growth above seven per cent.”
The study adds that in the medium term, the region is expected to face less dynamic demand for its main export goods and more costly external financing.