Economic Commission Lowers Forecast for Growth in LAC to 2.2%

The Economic Commission for Latin America and the Caribbean (ECLAC) has cut the region’s growth forecast for 2014 from 2.7 to 2.2%, citing lack of foreign investment and …

The Economic Commission for Latin America and the Caribbean (ECLAC) has cut the region’s growth forecast for 2014 from 2.7 to 2.2%, citing lack of foreign investment and limited room for implementing policies to spur an upturn.

Decreased domestic spending and weak external demand have been the main problems across the region, though some countries are likely to see significant growth in their GDPs this year, ECLAC noted.

According to the report, 2014 growth will be led by Panama, whose GDP is set to rise by 6.7%. Panama will be followed by Bolivia (5.5%) and Colombia, the Dominican Republic, Ecuador and Nicaragua — all with expansions of 5%.

The study indicates that the economic slowdown observed in the last quarter of 2013 persisted during the first months of 2014, meaning that the region will grow less than it did last year (2.5%).

According to ECLAC, the resumption of economic growth in the United States will benefit Mexico and Central American countries, while the recovery of the United Kingdom and several economies in the Euro zone will also have a positive impact, especially in the Caribbean, due to the arrival of more tourists.

“Macroeconomic policies have to take into account each country’s specific vulnerabilities. Without a doubt, it is important in all cases to increase investment and productivity to guarantee structural change with equality in the medium term. Both factors are key challenges for the economic sustainability of development, especially in the current context,” said Alicia Bárcena, ECLAC’s Executive Secretary, during the presentation of the report.

The Central American region plus Haiti and the Dominican Republic are expected to grow by 4.4%, while South America will expand by 1.8% as a whole, albeit with great diversity among different countries. The Caribbean will grow by 2%, a recovery from the 1.2% registered in 2013.

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Argentina’s economy will barely grow, while Venezuela should experience a contraction of 0.5%. In Chile and Peru, which will expand 3% and 4.8%, respectively, the decline in economic dynamism is linked to lower levels of investment and a deceleration in household consumption.

In Mexico, a rebound in growth is expected (2.5% compared with 1.1% in 2013), although the rate will be lower than previously forecast (3%), while Brazil will undergo a smaller annual expansion of 1.4%, compared with 2.5% last year.

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