Latin America and the Caribbean’s economy will slow in 2022, amid disparities and pandemic costs

Lower global growth will mean lower external demand and lower growth in world trade, which will have a direct impact on Latin American economies. Photo: UNCTAD.

Latin America and the Caribbean will slow to 2.1% of its economic growth rate in 2022, after an average growth of 6.2% in 2021.According to new forecasts published Wednesday by the Economic Commission for Latin America and the Caribbean, which highlight the asymmetries between developed and developing countries, and the difficulties in meeting the costs of the COVID-19 pandemic .

In the annual report “Primary balance of the economies of Latin America and the Caribbean 2021”, published during a virtual press conference from Mexico City, the Economic Commission for Latin America and the Caribbean warns that the slowdown is occurring in a context of significant inequalities between developed and emerging and developing countries in the ability to implement fiscal, social, monetary, health and vaccination policies for a sustainable exit from the crisis caused by the current pandemic.

High inflation, debt management, structural problems of low investment and productivity, poverty and inequality are the main challenges to growth and job creation in the region, according to ECLAC.

In the report, ECLAC asks for the facilitation of international financing and calls for greater regional integration and the continuation of vaccination against COVID-19.

“We are facing a period of great uncertainty in which disparities are widening and We will experience weaker growth, both in GDP and in trade. We will have a less favorable context for the region with less fiscal space and inflationary pressuressaid UN Executive Secretary Alicia Barcena.

According to the report, the region is facing a very complex year 2022: the persistence and uncertainty of the development of the epidemic, a sharp slowdown in growth, a drop in investment and productivity, a slow recovery in the employment, the persistence of the social effects of the crisis, a reduction in fiscal space, an increase in inflationary pressures and budgetary imbalances.

The region’s economic engines will be weak this year. The Economic Commission for Latin America and the Caribbean estimates that Brazil, the largest economy, will grow only 0.5% lower. Mexico will score +2.9%; Colombia + 3.7%, Chile + 1.9%.

Projected average growth of 2.1% shows differences between countries and sub-regions: The Caribbean will grow by 6.1% (excluding Guyana), Central America by 4.5% and South America by 1.4%. In 2021, the region posted growth above expectations, with an average of 6.2%, thanks to the weaker comparison base built up by 2020, increased mobility and a favorable external context.

Barcena noted that part of the cloudy horizon is due to the fact that Labor markets have not recovered from the health emergency.

“The epidemic had a very strong impact which was UnofficialWhich is expected to increase with devastating social impacts”, noting that this is clearly manifested in the vulnerability of certain sectors of the population, such as women.

Despite the setbacks, ECLAC expects a slight improvement in the levels of poverty and extreme poverty, with a decrease of 1.5% in poverty and 0.7% in extreme poverty.

The study attributes the complex reality of the region in 2022 to persistence of the pandemic and uncertainty as to its evolution; Sharp slowdown in global growth. Persistent weakness in investment and productivity and slow recovery in employment; The persistent social effects of the crisis. smaller financial space; Increase in inflationary pressures and fiscal imbalances.

Lower global growth will mean lower external demand and lower growth in world trade, which will have a direct impact on Latin American economies.

As it concerns As for the prices of raw materials, on which a large part of the regional GDP depends on its exports, expectations indicate a drop or, at best, to remain at the level of 2021, without rising again.

For this reason, the Economic Commission for Latin America and the Caribbean notes that the recovery of the countries of the region will depend above all on domestic demand, which in 2021 experienced a recovery with higher consumption driven by the monetary support put in place. put in place by governments to overcome the health emergency and transfers which have increased by 30%.

“We propose to maintain transport measures and other forms of support while creating jobs,” Barcena said.

He underlined that to control inflation and not stop growth, the monetary authorities must use all the tools at their disposal, beyond the interest rate. He also called for increasing collection levels and improving the tax structure.

“The expected slowdown in the region in 2022, together with the structural problems of low investment and productivity, poverty and inequality, demand that stimulating growth be a key element of policies, while addressing the pressures inflationary and macro-financial risks,” said Alicia Barcena. .

on covid vaccination, Parsina called for the continuation of vaccination campaigns as pillars of economic recovery, calling on rich countries, which had a monopoly on most vaccines produced, to share them with emerging and developing countries, where they could not. have access to it.

The Economic Commission for Latin America and the Caribbean noted that vaccination not only affects the control of the epidemic, but also reduces the risks of new mutations of the coronavirus, and warned that if vaccination coverage does not increase in all countries, the global recovery may not be sustainable.

It is clear that in addition to national policies, international support is needed, Barcelona confirmed.

We call on the international community to facilitate and improve access to finance in the region. Financing on more favorable terms, if possible on concessional terms. This is one of the issues on which ECLAC insists: a greater redistribution of liquidity and, incidentally, a greater redistribution of the concentration of wealth and income at the global level., He said.

He believed that one way to achieve this would be to impose a global tax of between 15% and 25% on large multinational companies.

“There are many things to be done, and many of them require national efforts by States, authorities, but also Better multilateral status, better cooperation process, greater unity in the region, greater integration, which is one of the shortcomings that we face in Latin America and the Caribbean.

“Regional integration can be a huge driving force, we’ve seen it in immunization, we see it in CELAC (Community of Latin American and Caribbean Nations) operations, but we have to get there also in sub-regional level,” he said. noted. Executive Secretary of Cepal.

According to Barcelona, The region has one outstanding task, “which is greater regional integration and resilience, as there will be disruptions in supply chains. Geographic proximity should help us build resilience in Latin America and the Caribbean.

(With information from the United Nations and the Economic Commission for Latin America and the Caribbean)

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