After two consecutive years of contraction, economies of countries in Latin America and the Caribbean are projected to grow 1.1% on average in 2017, largely due to better prices for the commodities that the region exports.
According to the annual economic survey by the Economic Commission for Latin America and the Caribbean (ECLAC), South America will grow 0.6% but the economies of Central America and Mexico are on course to expand 2.5%.
Positive growth in the US economy and an increase in remittances income are the factors benefitting Mexico. Meanwhile, for the economies of the English- and Dutch-speaking Caribbean, 1.2% growth is forecast, following a -0.8% contraction in 2016.
The report foresees that, in contrast to last year, all the countries in the region will experience positive growth rates in 2017, with the exception of Venezuela – the GDP of which is seen falling -7.2% – and two countries in the Caribbean (Saint Lucia and Suriname, the GDP of which is forecast to contract -0.2%).
The ECLAC has urged the regional countries to step up public investment in addition to inviting foreign firms to set up operations in their territory. “To resume medium- and long-term growth, countercyclical policies are needed,” said Alicia Bárcena, the Executive Secretary of the UN agency.
“This fiscal framework must be accompanied by a financial policy aimed at credit stabilization and a monetary policy that supports investment growth and goes beyond instruments such as the interest rate.”
Interestingly, the agency claims that it found ‘a narrow improvement’ in investment and greater dynamism in private consumption in the region. Despite the rebound seen in economic growth during the first quarter of 2017, labor conditions have continued to deteriorate.
Meanwhile, average inflation in the economies of the region has fallen since the second half of 2016, despite the fact that three economies, particularly Venezuela, still have rates above 20%.