ECLAC cuts forecast for Latin America, Caribbean growth

The Economic Commission for Latin America and the Caribbean revised the growth projection downwards for the region’s economies in 2025 downwards, on Tuesday.

The regional UN agency now forecasts that the LAC region’s economies will grow two per cent on average this year, which is four-tenths lower than what was projected in December 2024.

For the Caribbean sub-category, excluding Guyana, the forecast is eight-tenths lower. Guyana aligns politically and economically with the Caribbean but it is located in South America.

ECLAC said that the growth rates now expected, given the new revisions, are 2.5 per cent in South America, one per cent in Central America and Mexico and 1.8 per cent in the Caribbean, excluding Guyana.

ECLAC says the LAC region is facing a very complex and highly uncertain international scenario. Tariff announcements made by the United States not only have direct effects on what the region’s countries export to that economy, but they also have indirect effects via greater volatility in international financial markets, with significant fluctuations in stock and bond markets, which has clear implications for the yield of assets and of the interest rate in the United States and for the main global financial markets, the agency said.

“These announcements and the geoeconomic confrontation sparked have increased the risk of severe disruptions in global production chains and in international trade flows. All these factors have prompted a downward revision for growth prospects at a global level and particularly among the region’s main trading partners: the United States and China,” ECLAC said.

It noted, for example, that the International Monetary Fund in April revised its growth projection for the US down from 2.7 per cent to 1.8 per cent; for the eurozone, from one per cent to 0.8 per cent; and for China from 4.6 per cent to four per cent.

The UN agency’s new forecast rests on expected falloffs in aggregate demand. Private consumption will continue to be the main determinant of regional growth, but its pace is expected to continue decreasing, it said.

Additionally, ECLAC expects investment activity to be less robust than first predicted, given the likelihood of a deceleration in global trade, particularly among the region’s main trading partners, and the greater levels of uncertainty in the global economy.

The agency also suggested that the region may face headwinds in the continued efforts at reversing the path of low economic growth on which it had made progress over the past decade, but is urging LAC governments to stay the course.

“Invigorating growth requires a combination of more proactive macroeconomic and productive development policies than those the region has had up to now, increasing investment in physical and human capital, and putting productive development agendas into practice in dynamic driving sectors,” ECLAC remarked.

“That is why the region not only must invest more, but it also must invest better. This involves adopting new technologies, promoting cluster initiatives and good business practices, fostering deep improvements in the process of capital accumulation, and properly harnessing economies’ social and environmental capital,” the UN body said.

CMC