Latin America To Hit Just 1.6 Percent Economic Growth In 2023

News Americas, WASHINGTON, D.C., Mon. April 17, 2023: Latin America and the Dominican Republic is forecast to register just 1.6 percent in economic growth this year, which is below their real potential but higher than earlier estimates.

The Atlas Network Center for Latin America and the Uruguay-based Centro de Estudios de la Realidad Economica y Social (CERES) jointly released a report titled the “Latin Macro Vista Regional Report,” which outlines the economic outlook for Latin America and the DR for 2023 and beyond.

The region’s economic growth rate has slowed from nearly four percent in 2022, and over seven percent in 2021, indicating potential negative momentum.

While slowing growth is a cause for concern, there is also significant potential for LAC economies to surpass their growth estimates if policymakers in the region continue to embrace free-market reforms that prioritize business activity, open trade, and productive investment.

However, substantial obstacles exist in LAC countries. The first challenge is the high level of public debt, which amounted to 60 percent of regional gross domestic product (GDP) in 2022.

The second regional challenge is the need for greater progress toward trade openness. LAC countries still boast some of the most closed economies among the world’s emerging nations, with high tariff rates and low trade flows. By diversifying their trade partners and opening up to the world, LAC economies can truly achieve their long-term development goals.

Still the report highlights the potential for the LAC region to surpass its growth estimates if policymakers continue to prioritize free-market reforms, open trade, and productive investment.

But despite the potential for growth, there are substantial obstacles in LAC countries that must be addressed. The first challenge is the high level of public debt, which amounted to 60 percent of regional gross domestic product (GDP) in 2022. This high level of debt increases the cost of debt servicing and strains public resources.

The second challenge is the need for greater progress toward trade openness. LAC countries have some of the most closed economies among the world’s emerging nations, with high tariff rates and low trade flows. By diversifying their trade partners and opening up to the world, LAC economies can achieve their long-term development goals.

Assuming the region’s projected economic growth, LAC economies face an increasing debt trajectory, with their overall debt-to-GDP ratio expected to reach 69 percent by 2025.

The report identifies “nearshoring” as a short-term policy priority that can help boost the region’s growth. Nearshoring is a new production system where companies manufacture products in countries that are politically aligned with the West. It suggests that a combination of factors, including increased foreign investment and political stability, are driving this growth.

Dr. Roberto Salinas-León, Executive Director of Atlas Network’s Center for Latin America, said, “LAC policymakers must continue to embrace free-market reforms, without which the region will not reach its full potential.” In conclusion, policymakers in the LAC region must take decisive action to address these challenges and unlock the region’s potential for sustained economic growth.