Bloomberg Línea — The Economic Commission for Latin America and the Caribbean (ECLAC) presented Thursday its Preliminary Overview of the Economies of Latin America and the Caribbean 2022, in which it outlines the first economic growth estimates for the region this year.
The new estimate is that Latin America and the Caribbean will end the year with economic growth of 3.7%, 0.5% above the October estimate, when ECLAC projected growth of 3.2% for 2022.
“There is a slowdown in economic growth and global trade in both 2022 and 2023. The good news is that there is already a slowdown in inflation, which we hope can lead to a moderation in central bank monetary policy rates,” ECLAC executive secretary José Manuel Salazar-Xirinachs said during the presentation of the overview.
The UN agency noted that Latin America’s economy as a whole began to show deceleration from third quarter.
“For the region, growth deceleration is expected to continue in 2023 in a complex macroeconomic context. A balance must be struck between macroeconomic constraints and progress in boosting sustainable growth,” he said.
Country-by-country economic growth
In terms of countries, in 2022 Paraguay and Haiti will suffer an economic contraction of 0.3% and 2.0%, respectively, while Venezuela’s economic growth will be the most outstanding, with 12%, and Panama and Colombia are expected to grow by 8.4% and 8.0%, respectively, according to ECLAC.
For 2023, as projected in October by ECLAC, Chile will continue with economic contraction and it is even expected to be deeper, since in October a 0.9% decrease was estimated, and in the balance presented this Thursday it is estimated that the contraction in 2023 will be 1.1%.
Haiti also looks to be a country that will suffer economic contraction next year, with GDP contracting by 0.7%.
“These are the data provided by the estimates. Haiti has structural problems of poverty and is a state that has not achieved a good public policy, with massive outward migration and as a result of this inability to build a state with social cohesion, it has social and political outbreaks from time to time,” Salazar said.
Regarding Chile’s economic contraction, the ECLAC executive secretary said that there are specific factors such as private consumption that will see declines due to a labor market that has lost strength, as well as the withdrawal of pensions and government monetary deliveries, and that, together with high inflation, will act as a drag on the economy.
“Uncertainty due to the process of the new constitution (...) and on the external front there are also issues with trading partners such as China, which has low economic growth,” Salazar said.
Preliminary inflation estimates
Inflation in Latin America and the Caribbean as a whole is expected to be 6.4% in 2022 and drop to 4% in 2023.
However, ECLAC pointed out that the level of price rises next year would still be higher than the average from 2010 to 2019, which was 3.9%.
“The growing inflationary pressures gave way to one of the most simultaneous episodes of monetary policy rates in the world. It is the largest simultaneous number of monetary policy rate hikes since at least the 1970s″, Salazar added.
He also pointed out that, as a result of the rate hikes, there has been a considerable increase in financing costs, both in developed and emerging economies.
The global economy
For the global economy, ECLAC forecasts growth of 3.1% in 2022 and 2.6% in 2023, based on statistics from the International Monetary Fund.
As for world trade, the UN agency sees a sharp slowdown in the outlook, since after the rebound effect seen in 2021, when global trade grew 10.2%, it would grow by only 3.5% in 2022 and fall to a growth of 1% in 2023.