Caribbean will resume subdued growth in 2017 — ECLAC
SANTIAGO, Chile, (CMC) – After two consecutive years of economic contraction, the Economic Commission for Latin American and the Caribbean (ECLAC) has predicted that the region will experience a modest growth of 1.3 per cent in 2017 amid uncertainty about the global economy.
The United Nations regional organisation on Wednesday made public its annual “Preliminary Overview of the Economies of Latin America and Caribbean 2016”.
It called for revived public-private investment “in order to resume short- and long-term growth, and confront the risks and growing uncertainties posed by the international scenario”.
“We are at a turning point. Latin America and the Caribbean will resume growth but moderately and without clear engines driving it,” said Alicia BÃ¡rcena, ECLAC’s executive secretary, in presenting the document during a press conference here. “Its recovery will be fragile, as long as the uncertainties of the economic context continue, particularly the recently observed protectionist trends.
For this reason, resuming the path of regional growth requires much caution and a reversal of the investment process dynamic, which will demand a significant mobilization of financial resources,” she added.
According to the report, the region will close out 2016 with an average contraction of 1.1 per cent.
The report says South America will be the sub-region most affected, with a decline of -2.4 per cent; while the Caribbean will contract by 1.7 per cent and Central America will have positive growth of 3.6 per cent.
The Preliminary Overview states that urban unemployment rate shows an upward trend and could end 2016 at nine per cent – much higher than the 7.4 per cent recorded in 2015 – due to a decline in the employment rate and an increase in the labour force participation rate.
With regard to growth projections for 2017, the report says improved commodities prices would benefitthe terms of trade for South America, which is forecast to resume growth with an increase in gross domestic product (GDP) of 0.9 per cent; while the Caribbean is expected to grow by 1.3 per cent, mainly due to tourism.
Meanwhile, Central America, is forecast to expand by 3.7 per cent, according to the report.
It says greater external demand will benefit the region in general in 2017, in addition to a recovery of intra-regional trade “due to improved performance by the southern economies”.
“Nevertheless, the uncertainties of the international context will have differentiated effects on the individual countries and sub-regions of Latin America and the Caribbean, which will accentuate sub-regional differences based on the productive and trade orientation of their economies.”
The report adds that, while continued expansive monetary policy by the European Central Bank and the Bank of Japan is expected through the end of 2017, “the normalisation of interest rates in the United States could entail a readjustment in financial asset prices, financial volatility and increased financing costs for the region”.
Given this scenario, ECLAC recommended that regional countries continue fostering investment through countercyclical economic policies, “with productivity gains in addition to active fiscal measures and smart adjustments”.
The organisation also called for reducing tax evasion and avoidance, which totalled 6.7 per cent of regional GDP; safeguarding public spending; revising subsidy structures, especially for fuel; and incentives and reorienting measures “to promote investment and essential social spending”.
“The challenge of the big environmental push proposed by ECLAC lays the strategic framework for investment opportunities and innovation,” the report says.