Four reasons why Latin America will have almost zero growth in 2023

By Juan Pablo Álvarez

The latest report of the Economic Commission for Latin America and the Caribbean (ECLAC) showed, in line with other projections of international organizations, that the region will grow just 1.2% in 2023.

This figure eliminates any dream that this will be a year in which ills such as poverty or unemployment will be reduced.

This number contrasts sharply with what the International Monetary Fund (IMF) expects for emerging Asia (5.3%).

However, the IMF believes that Latin America and the Caribbean will grow 1.6%, i.e., slightly more than ECLAC.

The worst estimates are for South America, whose GDP is expected to increase by only 0.6%, according to ECLAC, with countries such as Argentina and Chile suffering contractions of 2% and 0.3%, respectively.

In an interview with television station CNN, William F. Maloney, chief economist for the Latin America and Caribbean region at the World Bank, detailed the four elements that he believes will determine LatAm’s meager growth in 2023

• The low growth rate in advanced countries
• The uncertain growth rate in China
• Rising interest rates around the world
• Falling commodity prices

In this report, Maloney also noted that there had been a drought in southern countries that prevented food exporters from taking advantage of the high prices left by the war in Ukraine.

This weather effect particularly affected Argentina, which was expected to expand in 2023, but all agencies are talking about a major recession.

The latest ECLAC report indicates that South America will be affected by the drop in commodity prices and the restrictions governments face to support activity.

“High inflation has impacted real incomes and is affecting private consumption and investment in the countries,” adds ECLAC.

The figure contrasts with the 1.3% estimated in December.

The new forecasts of the entity indicate that Argentina, Haiti, and Chile will suffer a contraction this year.

According to the organization in the Caribbean economies, the slowdown expected in 2023 is mainly because inflation has impacted both real incomes and consumption and production costs, with a negative effect on the competitiveness of exports of both goods and tourism.

Finally, for the economies of Central America and Mexico, ECLAC points out:

“Although this year’s growth represents a slowdown concerning 2022, in some cases, there have been upward revisions for what was forecast at the end of last year.”

“This is due to the upward revision of growth in the United States, the main trading partner and first source of remittances for its countries, which would affect both the external sector and private consumption.”

“In addition, the lower energy prices expected for this year compared to 2022 would act in favor, given that several of them are net energy importers”.

INSUFFICIENT GROWTH TO REDUCE POVERTY

Malone also said that for 2024 and 2025, the organization he works for is forecasting growth rates of more or less 2.4%, which is also “low”.

He lamented: “This rate is not enough to alleviate poverty or reduce social tensions.”

With information from Bloomberg