Latin America is expected to grow by 2.7% in 2022 in a complex economic context | Atalayar
Slower trade growth, a stronger dollar and tighter global financial conditions are some of the factors that will affect the economic recovery of countries in the region, the Economic Commission for Latin America and the Caribbean (ECLAC). predicting average growth of 2.7% for the region in 2022.
During the press conference presenting its Economic Survey 2022, held in Santiago, Chile, ECLAC updated its gray growth projections for the sub-regions for the current year: South America, 2.6% compared to 6.9% in 2021; the group formed by Central America and Mexico, 2.5% against 5.7% the previous year; and the Caribbean – the only sub-region that will grow more than in 2021 – 4.7%, excluding Guyana, against 4.0% last year.
ECLAC specified that these forecasts are averages which hide many national realities and recalled the great heterogeneity of the countries of the region.
“This year, 16 countries in the region, or nearly half, will not have regained the level of GDP they had before the pandemic,” pointed out Daniel Titelman, Director of the Economic Development Division of ECLAC.
Titelman also said the decline in economic activity has slowed the recovery of labor markets, especially for women, whose unemployment will reach 11.6% this year, compared to 9.5% in 2021.
Crises exacerbated by war in Ukraine
The ECLAC report explains weak growth and rising global inflation following a series of crises exacerbated by the war in Ukraine, which caused geopolitical tensions, lower global economic growth, reduced food availability and increased energy prices which, in turn, spurred inflation caused by the impact of the COVID-19 pandemic.
The Acting Executive Secretary of the Commission stressed that this situation is aggravated by the decline in investment and the growth of social demands, posing major challenges for macroeconomic policy, who must reconcile stimulus measures with policies to control inflation and make public finances sustainable.
“This cumulative sum of events forces us to rethink the economic aspect”, said Mario Cimoli, adding that the coordination of macroeconomic policies is necessary to support the acceleration of growth, investment, the reduction of poverty and inequalities, while tackling inflationary dynamics.
inflation, which achieved a regional average of 8.4%, led central banks to raise interest rates and reduce monetary aggregates to control it. However, monetary policy alone can lead to recession, Cimoli warned.
Lack of investment
In this respect, the report underlines that beyond the dynamics of the economic cycle, low investment growth over the past three decades has become a structural constraint to developmentthis is why it is crucial to reactivate the investment dynamic for sustainable and inclusive growth.
“Investment is the bridge between the short and medium term and is essential to combat climate change,” says the text.
The study indicates that between 1951 and 1979, investment increased by an average of 5.9% per year, while between 1990 and 2021 this figure only reached 2.9% per year.
In this context, ECLAC urges to increase investments in Latin America and the Caribbean, pointing out that in 2021 they were at the lowest levels compared to other regions.
He argues that this requires greater coordination between fiscal, monetary and exchange rate policy and the use of all the tools available to the authorities so as not to subordinate growth and investment to an anti-inflationary policy.
In addition, macroeconomic efforts need to be complemented through industrial, trade, social and care economy policieshe adds.
ECLAC considers that, while an important part of the financing to increase investments must come from the mobilization of national resources, international cooperation is very important in the process. “For this reason, official development assistance and funding from global financial institutions and development banks must be significantly increased,” it says.
“If investment does not increase, employment will not increase, and informality and inequality will not be reduced. We need investments that generate quality jobs. All the measures taken will be a palliative if the investments do not increase”, warned Cimoli.