The Economic Commission for Latin America and the Caribbean (ECLAC) is predicting that Caribbean economies will grow 2.1 per cent in 2019 even as it acknowledged an international scenario marked by what it describes as “greater uncertainty”.
ECLAC also projected that the region will end 2018 with average growth of 1.2 per cent.
“The year 2019 looks to be a period in which global economic uncertainties, far from waning, will intensify and will arise from different fronts,” said ECLAC in unveiling its last economic report of the year, titled “The Preliminary Overview of the Economies of Latin America and the Caribbean 2018”.
ECLAC said this will have an impact on the growth of the economies of Latin America and the Caribbean, which, on average, are seen expanding by 1.7 per cent.
It forecasts that Central America (excluding Mexico) will grow 3.3 per cent in 2019, South America 1.4 per cent, and the Caribbean 2.1 per cent.
On a country level, the report says Dominica is leading regional growth, with a 9.0 per cent expansion, followed by the Dominican Republic (5.7 per cent), Panama (5.6 per cent), Antigua and Barbuda (4.7 per cent), and Guyana (4.6 per cent).
The report warns that Venezuela will “suffer a minus 10 per cent contraction in its economy”; Nicaragua, a minus two per cent; and Argentina, minus 1.8 per cent.
The region’s biggest economies, Brazil and Mexico, are seen growing at 2.0 per cent and 2.1 per cent respectively.
According to the report, the countries of Latin America and the Caribbean will “confront a complex global economic scenario in the coming years, in which less dynamic growth is expected, both for developed countries as well as emerging economies, along with increased volatility of international financial markets”.
“On top of this, there is a structural weakening of international trade, aggravated by trade tensions between the United States and China,” it added.
The overall 1.7 per cent economic growth projection for Latin America and the Caribbean in 2019 is slightly below what ECLAC released last October (1.8 per cent), while the estimate for the current year (2018) was also trimmed to 1.2 per cent (from the 1.3 percent forecast in October).
The report notes “the greatest risk to the region’s economic performance in the run-up to 2019 continues to be an abrupt deterioration in the financial conditions for emerging economies”.
During 2018, ECLAC said emerging markets showed a significant reduction in external financing flows, while sovereign risk levels increased and their currencies depreciated against the dollar.
The report states new episodes of deterioration in future financial conditions cannot be discounted, and that the consequences for countries will depend on how exposed they are in terms of their external financing needs and profiles.
“Public policies are needed to strengthen sources of growth and cope with the scenario of uncertainty at a global level. The active role of fiscal policy in the region in terms of revenue and spending must be bolstered,” said ECLAC’s executive secretary, Alicia Bárcena.
“In this sense, it is essential to reduce tax avoidance and evasion and illicit financial flows,” she added. “At the same time, direct taxes and also health-related and green taxes must be strengthened.”
In terms of expenditures, in order to stabilise and invigorate growth, Bárcena urged that public investment be reoriented toward projects that have an impact on sustainable development, with emphasis on public-private partnerships and on productive reconversion, new technologies, and green investment.
“All of this while protecting social spending, above all in periods of economic deceleration, so that it is not affected by cutbacks,” the senior UN official said, adding that public debt profiles must be taken care of in light of the uncertainty that could increase their cost and levels.
As in previous years, in its “Preliminary Overview of the Economies of Latin America and the Caribbean” ECLAC projects a growth dynamic with varying intensities between countries and sub-regions.
“This reflects not only the differentiated impacts of the international context on each economy, but also the dynamics of spending components — mainly consumption and investment — which have been following different patterns in economies of the north and of the south,” the report states.
In its stocktaking of the current year, 2018, ECLAC’s report indicates that economic growth was led by domestic demand.
“Fixed investment showed a dynamic of recovery, while private consumption remained the main source of growth, even though its growth rates moderated since the second quarter of 2018,” the report noted.
In terms of fiscal policy, it says consolidation deepened in 2018, adding that the process of fiscal adjustment led to a reduction in the primary deficit — from 0.7 per cent of gross domestic product (GDP) in 2017 to 0.6 per cent of gross domestic product in 2018 — “although this was accompanied by a small increase in public debt.”