Latin America and the Caribbean: projections 2006-2007

This document was prepared by the Economic Projections Centre, under the supervision of Hubert Escaith, Director of the Statistics and Economic Projections Division of the ECLAC. André Hofman, Chief of the Economic Projections Centre (ECP), was in charge of technical coordination and for conducting the study. The assistance of the national and subregional offices and of the ECLAC Economic Development Division was much appreciated. The views expressed in this document, which have not been formally edited, are the sole responsibility of the working group and do not necessarily reflect the views of the Organization. Starting this year, the Centre for Economic Projections at ECLAC's Statistics and Economic Projections Division, publishes the Atlas of Growth in Latin America and the Caribbean (Last update: July 2006). This new product is an interactive graphical version of the main Economic Projections Document, which will provide immediate and user-friendly access to the individual growth projections for the countries in the region. Summary: The gross domestic product (GDP) of countries in Latin America and the Caribbean will grow by 4.6% in 2006, up slightly from 2005. This could lead to an increase of more than 3% in per capita GDP, stemming from continuing strong domestic demand, as well as from an external sector that will continue to be driven by lively world trade, spearheaded by the Asian economies. The region's average growth rate is expected to fall slightly in 2007 by approximately half a percentage point, chiefly because Argentina and the Bolivarian Republic of Venezuela will have completed their recovery. The Latin American economies will grow at fairly similar rates in 2006, by between 3% and 6%, with the exception of Argentina and the Bolivarian Republic of Venezuela, which will grow by more than 6%. As in previous years, the Southern Cone (Argentina, Chile, Paraguay and Uruguay) and the Andean Community are projected to be the regions with the highest growth rates, with 6.9% and 5.7% respectively. Mexico and Central America are expected to experience lower growth than Latin America in 2006, following the trend of recent years. However, the gap is closing and the subregion is expected to grow by around 3.6%. The inflation rate for Latin America and the Caribbean in 2006 is forecast to be much the same as in 2005, in the order of 5% to 7%, owing to cost pressures associated with energy prices, that will feed into prices somewhat belatedly. In 2006, as in 2005, the current account is expected to remain in surplus, although not by as much, owing to a continuing recovery in imports associated with strong domestic demand. In the world context, in 2006 the United States' growth rate is forecast to be slightly lower than in 2005, whereas the average growth rates for Japan and Europe are expected to be higher. This will stem from slightly more restrictive macroeconomic policies in the United States, together with sustained growth in domestic demand in both China and Japan. Furthermore, the worst of the contractive effect of high oil prices on the world economy is thought to have already occurred in 2005. This year, growth in the United States and Japan is forecast to be around 3%, whereas in the European Union it will be between 1.5% and 2%. Based on these factors, there are good grounds for expecting the positive terms-of-trade trend to continue, especially for countries exporting oil or metallic minerals. In Central America and the Caribbean, where most countries are oil importers, a negative trend in trade terms is projected.