REVISED projections from the Economic Commission for Latin America and the Caribbean (ECLAC) are showing that the Caribbean will record the highest level of growth when compared to its other sub-regional counterparts.

According to ECLAC’s Economic Survey of Latin America and the Caribbean (August 2022), the Caribbean will grow by 10.2 per cent, buoyed 52 per cent gross domestic product (GDP) growth forecast for Guyana. In comparison, the United Nations body projected 2.6 per cent GDP growth for South America and 2.5 per cent for Latin America and Mexico.

Even excluding Guyana, the Caribbean is still expected to improve its economic performance by 4.7 per cent, with projections for Antigua and Barbuda, The Bahamas, Barbados, Belize, Dominica, St Kitts and Nevis, and St Lucia to increase GDP by five per cent or more.

Without including Mexico, Central America’s GDP will rise by 4.1 per cent.

While noting that the overall growth projection for Latin America and the Caribbean is at 2.7 per cent, ECLAC also warned that the region could continue on a path of low growth due to “acute macroeconomic restrictions [which] are hurting the region’s economies”, resulting in a complex outlook in 2022 and the years to come.

The report also highlighted that a sequence of crises has led to the scenario of low growth and accelerating inflation in the global economy. Outlook for the region will continue to decline when taking into consideration lower growth in trade, US-dollar appreciation, and tougher global conditions.

“In a context of multiple goals and growing restrictions there must be a coordination of macroeconomic policies that would support the acceleration of growth, investment, and poverty and inequality reduction, while also addressing economic dynamics,” ECLAC’s Acting Executive Secretary Mario Cimoli outlined during the release of the survey at the regional organisation’s headquarters in Santiago de Chile last Tuesday.

Along with low growth and inflationary pressures, the survey highlighted that the LAC was also faced with low dynamism in job creation, declining investment, and growing social demands. To this end, it urged policymakers to “strike a balance between policies that would drive economic reactivation and policies aimed at controlling inflation and ensuring the sustainability of public finances”.

At the regional level the average rate of inflation as of June 2022 was 8.4 per cent, with South America recording the highest level of price increase of 8.8 per cent, Central America and Mexico with 7.5 per cent, and the Caribbean averaging 7.3. (The Caribbean does not include Haiti, the Dominican Republic and Cuba, which were categorised as Latin American.)

Additionally, the report said that international events such as the war betwen Russia and Ukraine have also contributed to “less vigorous global economic growth”, a contracting supply of food, and higher gas prices, which were already in play because of the novel coronavirus pandemic.

“The economic survey 2022 also shows that the Ukraine conflict intensifies the upward trend of commodities’ prices that had already emerged, starting in the second half of 2020, leading some of these prices to historic highs. For the region on average, the effect is mixed and a seven per cent decline in terms of trade for basic products is forecast,” ECLAC outlined.

Another challenge for the region’s growth which the ECLAC economic survey 2022 identified was low growth in investment over the last 30 years and its limiting impact on development. In this regard, the commission said that “reactivating the investment dynamic” is crtitcal to achieving sustainable and inclusive growth as well as addressing risks associated with climate change.

“To achieve this, greater coordination is needed between fiscal, monetary and exchange rate policy — and authorities must take advantage of the full set of tools at their disposal to ensure that growth and investment is not subordinated to anti-inflationary policy. In addition, macroeconomic efforts must be complemented by industrial, trade and social policies and the care economy,” ECLAC advised.

Finally, while the report emphasises that an important part of the financing to increase investment should come from domestic resource mobilisation, it stressed that “international cooperation must accompany this process. For that reason, official development assistance and financing from global financial institutions and development banks must be significantly increased,” the report concluded.