The IDB warns that Latin American economy will grow slightly

The region will grow below the world trend due few and low-quality investments

The IDB warns that Latin American economy will grow slightly


Leer en español: El BID advierte que la economía en Latinoamérica crecerá poco

The Inter-American Development Bank (IDB) is an international financial organization, created in 1959 by Latin American countries to promote the investment of public and private capital in development projects in the hemisphere, and to help member countries to orient their policy towards a better use of their resources. Recently, this entity released a preview of the report that raises forecasts about the economy in Latin America and the Caribbean, and warned that the outlook in terms of growth is not encouraging for this region.

The first part of the Macroeconomic Report was launched during the IDB Annual Meeting held in Mendoza, Argentina; in said document it is calculated that the region's GDP would grow around 2.6% on average between 2018 and 2020, in line with the average of 2.4% registered between 1960 and 2017. However, this rate is lagging behind with respect to regions such as Asia and Emerging Europe (made up of countries such as Poland, Ukraine, and the Czech Republic, among others), which project growth of 6.5% and 3.7% over the same period.

The report also indicates that global growth in 2018 will be 3.9%, a level that has not been reached since 2011, but despite this positive indicator for the global economy, in Latin America and the Caribbean the economy will grow by only 1.9%.

The IDB warns that the forecast for Latin America and the Caribbean has risks, since a fall in the prices of global assets could reduce regional growth by 0.7% per year (2.1% of GDP in the next 3 years).

According to the organization, "such risks are not uniformly distributed, the Southern Cone (excluding Brazil) is expected to present a growth rate of 2.9% in 2018-2020 and could lose 0.8% annual growth and Mexico grows to 2.7% in 2018-2020 and could lose 1% of GDP each year in that period, while Brazil would grow only 2% per year during the next 3 years and could lose 0.5% annually as a result of the negative shock on global prices".

Another risk that may arise for Latin America is higher than expected US growth, which would lead to a further increase in interest rates of the Federal Reserve, and could represent a decrease of 0.3 percentage points for the region. in the growth forecast of 2018-2020.

In spite of everything, the chief economist of the IDB, José Juan Ruiz, pointed out that "the good news is that most of the region has grown again", but added that "however, growth is not fast enough to satisfy the desires of the growing middle class of the region. The biggest challenge is to increase the levels and efficiency of the investments so that the region becomes more productive, grows faster and more stable and protects the region from external shocks".

The report, published in its entirety on March 25, 2018, also explains that the main reasons for the low economic growth in Latin America and the Caribbean are the low levels of investment and the low efficiency of investments.


Latin American Post | Andrea del Pilar Rojas Riaño

Translated from "El BID advierte que la economía en Latinoamérica crecerá poco"