The Economic Commission for Latin America and the Caribbean (ECLAC) updated its growth projections on economic activity in 2019 for the region’s countries, slightly lowering its estimate for the regional average to 1.3% compared with the 1.7% foreseen in December 2018, when the institution released its annual report Preliminary Overview of the Economies of Latin America and the Caribbean 2018.
This new estimate for 2019 -informed today by a press release- is influenced by the complex external scenario as well as domestic dynamics that are being observed in the countries of the region. As in past years, ECLAC projects growth dynamics that vary in intensity between countries and subregions, and that reflect not only the differentiated impacts that the international context has on each economy, but also the behavior of the components of expenditure – mainly, consumption and investment – which have been following different patterns in the economies of the north and the south.
According to ECLAC, economic activity in South America will rise from 0.5% growth in 2018 to 1.1% in 2019. Meanwhile, Central America will grow 3.1% in 2019, with slight downward revisions in the majority of countries. This is the consequence of the greater deceleration forecast for the United States this year, which affects trade as well as the remittances destined for the subregion, among other factors.
ECLAC adds that for Central America, Mexico, the Dominican Republic, Haiti and Cuba, growth will be 2.0%. Likewise, the economies of the English- and Dutch-speaking Caribbean will also notch 2.0% growth in 2019, near what was forecast in December.
According to the organization, the main risks to the region’s economic performance this year continue to be a lower rate of global growth, reduced dynamism in global trade, and the financial conditions faced by emerging economies. In addition, the trade war between the United States and China has yet to be resolved, which entails risks not only to global trade and the world’s growth rate in the medium term, but also to financial conditions themselves, since they tend to be linked to agents’ perception of greater or lesser risk.
Meanwhile, commodities prices may also be negatively affected by an increase in trade restrictions, ECLAC adds. As of now, a slight decline in the level of average prices for basic products (of -5%) is forecast for 2019, with energy products showing the steepest fall (-12%). But since the level of global activity and global trade is worsening more than expected, this projection could be revised downward.
In addition to all this, as in past years, concerns persist regarding the evolution of China’s economy: it is expected to decelerate once again in 2019, to 6.2% growth. Finally, there are the habitual geopolitical risks, compounded by ongoing uncertainty regarding certain processes that not only have geopolitical importance but also economic significance on a global level, such as Brexit.