The Economic Commission for Latin America and the Caribbean (ECLAC) slightly revised upward its growth projection for the region's economies in 2024. According to new estimates released today, the United Nations agency forecasts that the region will grow by an average of 2.1% this year, with South America growing by 1.6%, Central America and Mexico by 2.7%, and the Caribbean (excluding Guyana) by 2.8%.
The expected expansion for the region in 2024 remains on the path of low economic growth observed in recent years, and the great challenge is how to move towards higher, more dynamic and inclusive growth, the UN Commission indicates.
The region is facing a complex international scenario, characterized by economic activity and global trade growth below historical averages, along with interest rates that remain high in developed countries, resulting in higher financing costs for emerging countries, including the region, the organization's statement highlights.
It argues that domestically, the downward trend in inflation has given central banks in several countries room to implement reductions in their policy interest rates, from which a favorable impact on economic activity could be expected.
During 2024, global markets will be marked by several risk factors, according to ECLAC. “Growing geopolitical tensions are leading the world toward a significant realignment of value chains. Furthermore, there is a risk that increases in commodity prices could delay policy interest rate cuts by major central banks, with negative effects on global economic growth. In addition, if interest rates remain elevated for a longer period, they could further increase vulnerabilities related to debt burdens in several emerging and developing economies, as well as the vulnerability of the financial sector in developed countries.”.
As ECLAC has indicated on previous occasions, the low growth expected in 2024 is not merely a temporary problem, but rather reflects the decline in the trend growth rate of the regional GDP. The region is experiencing a development crisis characterized by three mutually reinforcing traps: a low-growth trap, a high-inequality and low-social-mobility trap, and a low-capacity institutional and ineffective-governance trap. These traps condition and limit the achievement of the United Nations 2030 Agenda and, therefore, the attainment of inclusive social development.
To boost growth, ECLAC has been emphasizing that the region must increase its productivity and boost investment in physical and human capital. To achieve this, the region must not only invest more, but also invest better. This involves adopting new technologies, promoting cluster initiatives and best business practices, fostering significant improvements in the capital accumulation process, and making proper use of the social and environmental capital of its economies.
ECLAC has also identified a portfolio of at least 15 key sectors that will drive more sustainable and inclusive growth. The region needs to invest in several critical areas to increase productivity, including infrastructure, telecommunications, digitalization, research and development, significant improvements in health programs, and adapting education systems to respond to the changes that digitalization and automation are bringing to labor markets.
Cover photo: ECLAC headquarters building.
