The Inter-American Development Bank (BID) forecasts a 2024 economic downturn in Latin America, projecting a modest GDP growth of 1.6%.
Despite surpassing the 1.0% growth forecast for 2023 with a 2.1% rise, the region will have to wait until 2025 to reach a 2% annual growth rate again.
Key factors like global economic slowdown, high interest rates, stable commodity prices, fiscal consolidation, and high debt influence these projections.
The BID flags risks like U.S. growth slowing to 1.3% in 2024 and ongoing inflation, possibly keeping interest rates high.
This might cause a recession in Latin America and the Caribbean by early 2025, bottoming out at -0.4% in Q2, but recovery is expected by year’s end.
The BID highlights Latin America’s productivity problem, noting its growth has flatlined at 0.06% since 1960, lagging behind Asia’s economies.
Eric Parrado, BID’s chief economist, stresses the need for reforms to enhance productivity, economic resilience, and sustainable growth.
Recommendations are to enhance education, aid small businesses, widen global market access, attract foreign investment, and foster a competitive credit market.
Three key strategies
After meetings in Punta Cana, the BID and BID Invest endorsed three key strategies:
- launching a new Institutional Strategy,
- boosting BID Invest’s capital by $3.5 billion and
- allocating an extra $400 million to BID Lab for a scalable model.
These measures aim to boost the BID’s lending capacity in Latin America by at least $112 billion over the next decade.
BID President Ilan Golfajn highlights the region’s structural challenges, including social demands, fiscal limitations, and slow growth, exacerbated by climate change.
Yet, he sees significant opportunities for the region to contribute to solving global challenges, potentially marking a turning point for both the BID and Latin America.