The Economic Commission for Latin America and the Caribbean (ECLAC) has projected a 0.8% drop in the region’s GDP growth, warning that the economic deceleration could stoke unemployment in urban areas.
“To promote economic recovery and meet the challenges imposed by the 2030 Agenda for Sustainable Development, all countries in the region should mobilize investment,” said the UN agency in its annual economic survey released in Santiago, Chile, this week.
According to ECLAC, Central America will register good economic growth, but the economies in South America and the Caribbean will slide. Interestingly, the regional growth will be led by the Dominican Republic (6.0%), Panama (5.9%), Nicaragua and Bolivia (4.5%), and Costa Rica (4.3%).
It has blamed Brexit for the further decrease in the region’s commodities exports, adding that the Britain’s decision to leave the European Union has produced greater risks to the world’s future growth.
In the regional sphere, the report forecasts a 2.1% economic contraction for South America in 2016, mainly due to a deterioration in its terms of trade, weaker external demand, and a significant deceleration in domestic demand, which reflects a sizeable fall in domestic investment.
Central America will grow 3.8% thanks to the boost coming from its improved terms of trade (resulting from lower hydrocarbons prices), the recovery of its external and domestic demand, and increased income from remittances. The Caribbean, meanwhile, will suffer a 0.3% contraction in GDP.
Six countries are expected to show an economic contraction in 2016: Venezuela (-8.0%), Suriname (-4.0%), Brazil (-3.5%), Trinidad and Tobago (-2.5%), Ecuador (-2.5%) and Argentina (-1.5%).
“Faced with an economic contraction, the region needs progressive structural change with a big environmental push that promotes development based on equality and sustainability,” said Alicia Bárcena, Executive Director of ECLAC.
The economic deceleration, the agency says, will have an impact on the urban unemployment rate, which in 2015 was 7.4% and which is expected to increase to 8.1% in 2016. Inflation, meanwhile, should behave similarly to that of last year, with greater pressures on southern economies.
ECLAC has suggested that countries should change their fiscal structures and fight tax evasion, which reached the equivalent of 6.7 points of the regional GDP in 2015 at an estimated $340 billion dollars.