ECLAC warns of prolonged period of low regional growth

The Economic Commission for Latin America and the Caribbean, ECLAC, is warning that the region will experience a prolonged period of low growth, and that it is estimated that economic output, or gross domestic product, will expand by just 2.2 per cent, on average, in 2025 and 2.3 per cent in 2026.

The forecast aligns with the rates recorded in 2023 and 2024.

In its latest edition of the annual Economic Survey of Latin America and the Caribbean 2025, subtitled ‘Resource Mobilization to Finance Development’, ECLAC said the new projections for this year represent a slight upward revision from the two per cent it published in April, which is attributable to improved GDP performance in the first quarter of the year.

The report emphasised that the estimates point to different dynamics among subregions and countries.

In South America, a 2.7 per cent expansion is foreseen in 2025, above the regional average. However, in the rest of the subregion’s countries, a slowdown relative to 2024 levels is expected.

In 2026, South America’s growth is seen easing again to settle at 2.4 per cent. In Central America and Mexico, projected growth for 2025 is one per cent, nearly half the 1.8 per cent expansion recorded in 2024, while in the Caribbean, excluding Guyana, growth is forecast at 1.8 per cent this year and 1.7 per cent in 2026, “marking a deceleration versus 2024, which is attributable to lower GDP growth in the United States, and the ensuing reduction in the demand for tourism services, in addition to lower global demand for services”, the report noted.

“The subregion continues to face high costs for energy imports and transportation, as well as notable exposure to natural disasters – factors that impact its external position and debt levels. In contrast, Guyana is seen maintaining high growth rates, thanks to continued investment in the hydrocarbons sector,” ECLAC said.

The scenario for 2025-2026 will be marked by less dynamism in domestic aggregate demand and characterised by weak domestic demand, particularly due to slower private consumption.

ECLAC, an agency of the United Nations, said that in 2025 and 2026, global economic growth is seen easing as a result of multiple conditioning factors, including geoeconomic tensions and fragmentation, even more restrictive financial conditions, a weakening of international trade, and armed conflicts.

The region’s balance of payments will continue to be subject to various risks, such as the worsening of geopolitical conflicts, the volatility of commodities prices, and the synchronised deceleration of the world’s main economies, the UN agency said.

Employment growth is also expected to slow. But the unemployment rate is expected to stabilise at around 5.6 per cent. A slight reduction in informality and in the labour gap between men and women are expected, but these indicators will remain at high levels, ECLAC noted.

“The 2025 and 2026 projections point to stable regional inflation, although the risks of upward inflationary pressure are expected to persist,” the ECLAC report noted, while emphasising that there was great uncertainty.

It said the growth dynamics of the region’s economies could deteriorate as a result of increased global risks.

ECLAC Executive Secretary José Manuel Salazar-Xirinachs said that given this complex outlook, the region needs to urgently “mobilise greater resources to overcome the traps of low growth, high inequality, limited social mobility and ongoing structural development gaps”.

“In the medium term, Latin America and the Caribbean will face the challenge of preserving its macroeconomic stability and advancing its productive transformation in an increasingly volatile international environment,” said Salazar-Xirinachs.

“Facing this challenge requires articulating a long-term strategic vision to underpin sustainable and inclusive development, with short-term macroeconomic policies that would allow for mitigating risks and reducing exposure to external shocks,” he added.

The ECLAC report also addressed three key dimensions for boosting development financing capacity in the region, based on three strategic pillars.

The first pillar addresses domestic resource mobilisation, including increasing public investment, and strengthening tax collection by reducing evasion and streamlining tax expenditures.

The second deals with the mobilisation of external and private resources, inclusive of a redefinition of eligibility criteria for official development assistance, scaling up private investment by developing capital markets at national levels, and promoting the use of instruments such as thematic bonds, debt swaps and mixed financing.

The third pillar stressed the importance of development banks in the financial architecture and recommended enhancements to the role of these institutions in resource mobilisation.

CMC