SANTIAGO (AP).— The World Bank lowered its growth projections for Latin America and the Caribbean for this year from 2.3% to 2.1% due to the impact of the war in Iran and a complex macroeconomic scenario with high borrowing costs, weak external demand and inflationary pressures due to geopolitical uncertainty.
In your “Economic Update for Latin America and the Caribbean” published yesterday Wednesday, the organization indicated to Brazil and Mexico as the economies that could face greater adversity, affected by restrictive domestic financial conditions, limited fiscal space and uncertainty linked to global trade policy.
On the other hand, Argentina stands out in the regional scenario with one upward exception.
Thus, the World Bank foresees that The Argentine economy will grow 3.6%, while Brazil and Mexico appear stagnantwith an expansion of 1.6% and 1.3%, respectively. Colombia, in turn, would grow 2.2% thanks in part to the recovery of investment.
According to the entity, Latin America is once again emerging “as one of the slowest growing regions in the world.”
The data reflect a regional panorama that combines investment that is still at quite low levels and a “high global and internal uncertainty” marked by the consecutive increase in tariffs, the intensification of conflicts and, since recent weeks, the war in Middle East.
“We have no idea how long” the conflict will last, the chief economist for Latin America and the Caribbean of the World Bank, William Maloney. “If it lasts three months, we estimate that the price of a barrel will be around $85. But if it lasts longer, it will rise more and that of course influences global inflation.”
The impact of the war could also generate a cascade effect, affecting other industries and causing secondary consequences such as higher interest rates and greater pressure on domestic economies.
“In addition, everything that comes with rising oil prices and interest rates will likely cause a slowdown in the United States, Europe and China, which will affect the demand for our raw materials and our exports in general,” Maloney warned.
The World Bank indicated that, despite the forecasts, Latin America and the Caribbean can reposition itself in this “challenging” scenario through appropriate policies, such as the use of its natural resources and energy potential, as well as reforms to create quality jobs and also the diversification of its markets.
“We have many long-term tasks that we must work on to achieve higher growth rates, improve our investments in infrastructure, raise the quality of our education, invest more in innovation, improve the quality of our companies and facilitate exports to the rest of the world,” Maloney said.
In that sense, he highlighted the recent signing of the free trade agreement between the European Union and the South American bloc. Mercosur —that integrate Brazil, Argentina, Paraguay and Uruguay— and that opens the doors to a potential market of more than 700 million consumers, although he warned that there are still other “pieces of the global puzzle” to work on.
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