IDB: Latin America and Caribbean economies to grow 2.1% in 2026

Latin American and Caribbean economies are projected to grow by an average of 2.1% in 2026, broadly in line with the region’s long-run average, according to a new macroeconomic report from the Inter-American Development Bank (IDB).

The projection, outlined in Resilience and Growth Prospects in a Shifting Global Economy, reflects a slight slowdown from 2.2% growth in 2025. Still, the report points to steady labour markets, largely contained inflation and improved investor confidence as signs of resilience amid global uncertainty.

By the end of 2025, the median sovereign spread had fallen to 209 basis points, down from 268 in 2019, signalling stronger market confidence and historically lower borrowing costs across much of the region.

“Latin America and the Caribbean navigated global uncertainty with resilience,” said Laura Alfaro Maykall, the IDB’s chief economist and economic counselor. She added that countries must now accelerate productivity-led growth, strengthen public finances and tap into opportunities linked to digitalisation, artificial intelligence and energy to lift living standards.

Despite the relatively stable outlook, the report warns that growth remains too weak to close income gaps. Public debt levels remain elevated, averaging 59% of GDP, and rising interest payments are placing added pressure on government budgets. Debt is projected to range between 57% and 66% of GDP by 2028 under baseline and stress scenarios.

The region’s natural-resource base could offer a significant advantage. With roughly half of global lithium resources, about 35% of copper reserves and more than 20% of rare-earth reserves, Latin America and the Caribbean are positioned to play a strategic role in global energy and technology supply chains. However, the report cautions that capitalising on this potential will require stronger institutions, sound fiscal management and robust environmental governance.

Labour markets improved in 2025, with unemployment rates falling in most countries and women’s participation rising sharply. Yet productivity gains remain modest, and demographic shifts are slowing the growth of the working-age population. As a result, future expansion will depend heavily on skills development and innovation. Job postings referencing artificial intelligence climbed to 7% of total vacancies by mid-2025, making AI-related skills the fastest-growing category in the region.

The IDB concludes that policies promoting competition, better skills formation, deeper regional integration and more advanced value chains will be critical to boosting productivity and building more resilient and inclusive economies.