(August 4, 2014) ECLAC revised its projections for Latin American and Caribbean economies, which will experience average growth of 2.2% in 2014, affected by the weakness in external demand, less dynamic domestic demand, insufficient investment, and limited room for implementing policies to spur an upturn, the organization announced today.
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 added.
The United Nations regional commission unveiled its report Economic Survey of Latin America and the Caribbean 2014, in which it cut the regional growth forecast for 2014 that was issued last April (2.7%).
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%). 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.
"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%. That country will be followed by Bolivia (5.5%) and Colombia, the Dominican Republic, Ecuador and Nicaragua, with expansions of 5.0%.
The Central American Isthmus plus Haiti and the Dominican Republic is expected to grow 4.4%, while South America will expand 1.8%, although with great diversity among countries. The Caribbean will grow 2.0%, which implies a recovery from the 1.2% registered in 2013.
The reduction in estimated growth for 2014 responds to different factors, depending on the country being analyzed, 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%-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% and 4.8%, 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% compared with 1.1% in 2013), although the rate will be lower than previously forecast (3%), while Brazil will undergo a smaller annual expansion of 1.4%, compared with 2.5% 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 emphasizes. The regional economies that are more specialized in exporting commodities to that country could be affected if the Asian giant cannot maintain its growth above 7%.
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.
The Economic Survey 2014 stresses that in light of this new scenario, macroeconomic policies to manage the economic cycle and those oriented towards fostering more long-term growth must be closely coordinated.
"Macroeconomic policy must be reoriented, seeking to create the conditions for sustained growth and increased productivity. For that to happen, it is necessary to foster greater investment (public and private) in infrastructure and innovation and to boost the diversification of production," the report highlights.
- Table: Latin America and the Caribbean. Gross Domestic Product Variation, 2011-2014.
- Complete Document: Economic Survey of Latin America and the Caribbean 2014.
- Presentation by ECLAC Executive Secretary, Alicia Bárcena (in Spanish).
Any queries should be sent to ECLAC's Public Information Unit.
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