Growth prospects in Latin America are low

He World Bank (WB) announced this Wednesday that Latin America will grow more than expected in 2023, although at rates similar to those of a decade ago, which are not enough to make the necessary progress in terms of inclusion and poverty reduction.

The report presented this Wednesday estimates that the region’s GDP will grow by 2% in 2023, six tenths higher than the previously projected 1.4% (in June), but “still below the growth of all other regions of the world”, the body said.

This progress is related to the highest growth recorded by the G7 major powers, he explained. William Maloney, World Bank Chief Economist for Latin America and the Caribbean.

“It is true that commodity prices are weakening, but on the other hand, US GDP growth was much higher than expected and overall the G7 is performing a bit better than we thought and that helps the region a lot,” precise.

The region is expected to grow by 2.3% in 2024 (three tenths higher than estimated in June) and 2.6% in 2025.

He The World Bank orAn analysis by country is also presented, and among the main economies Mexico will grow by 3.2%, Brazil by 2.6%, Peru by 0.8% and Colombia by 1.5%, while Argentina will fall by 2.5% and Chile will fall by 0 .4%.

Regional inflation, excluding Argentina and Venezuela, is 4.4%, compared to 6.4% in member countries Organization for Economic Cooperation and Development (OECD) and 8.6% from Eastern Europe, notes the bank.

These growth prospects, the World Bank points out, “remain low” compared to the region’s potential and are not “a reflection of global conditions or the collateral damage of the pandemic”, but “a reflection of structural problems that have not been resolved for a long time”, according to the report .

“This is disappointing. We have a bigger long-term growth problem, as these roughly 2% growth rates are similar to what we experienced in the 2010s and reflect longer-term structural problems.”Maloney noted.

There are several challenges facing the region, including the “fiscal front”, with high public spending, exacerbated by high interest rates, limiting “progress on debt reduction”.

Therefore, according to the World Bank, although debt to GDP has fallen to 64% of GDP from 67% a year ago, it remains well above the 2019 level of 57%.

Two major challenges and limitations it faces Latin America, Maloney points out, are the weak attraction of foreign capital and also low productivity.

Despite increases in foreign direct investment in Argentina and Brazil over the past year, “there is little evidence in recent years that the region has taken advantage of the realignment of global value chains,” the WB says.

Even Mexico, despite its proximity to the United States, has seen very little growth in foreign direct investment (FDI) flows.

A situation motivated, according to Maloney, by facts such as “the infrastructures are not always well designed and there are not enough of them” or that uncertainty always hovers over the region.

“This uncertainty, both in terms of politics and the rules of the game (local laws and regulations), discourages foreign investors and domestic investors,” full stop.

In terms of productivity, he points out, the region has “very low productivity” which, among other things, is closely related to low “technological adoption” and the lack of education systems in many countries.

Therefore, in his report “Related: Digital Technologies for Inclusion and Growth”, The World Bank insists that “digital technologies can help boost growth and make it greener.”

Greater and better connectivity can help in various aspects, from improving government services, improving citizen satisfaction with governance or increasing agricultural productivity.