SANTIAGO, Chile (CMC) — The Economic Commission for Latin America and the Caribbean (ECLAC) says the growth rate in the region is projected to be two per cent this year, increasing slightly to 2.4 per cent next year.

ECLAC in its “Preliminary Overview of the Economist of Latin America and the Caribbean,” is proposing a series of policies for the region to be able to escape the trap of low growth capacity in which it is caught.

It warned that this year and next, the region’s economies will stay mired in a trap of low capacity for growth, with growth rates that will remain low and a growth dynamic that depends more on private consumption, and less on investment.

ECLAC said that the average annual growth for the LAC region during the 2015-2024 decade has been one per cent, which implies stagnation of gross domestic product (GDP) per capita during that period.

“To tackle the trap of low capacity for growth, it is necessary to increase the ability of economies to mobilise financial resources effectively, with the aim of strengthening resilience in the face of economic fluctuations,” said ECLAC’s Executive Secretary, José Manuel Salazar-Xirinachs.

He said these policies can be implemented while also strengthening productive capacity in the medium and long term, by adopting productive development policies geared towards increasing productivity, fostering investment in productive capital and creating quality employment.

According to the ECLAC document, in 2025, South America is seen growing 2.6 per cent; Central America, 2.9 per cent; and the Caribbean, without including Guyana, is seen expanding by 2.6 per cent.

“In this context, the region’s labour markets continue to be marked by a low pace of job creation, high informality and significant gender gaps. In accordance with this low GDP growth, employment in the region also shows limited growth of 1.7 per cent in 2024, which is the lowest rate recorded in the period following the coronavirus disease (COVID-19) pandemic,” ECLAC said.

It noted that with regards to labour informality, it is expected that the region’s average rate of informal employment will stand at 46.7 per cent, which would point to a decline of 0.4 percentage points in comparison with the rate seen in 2023.

“Despite this slight reduction in informality, significant challenges remain in the region in terms of formalising employment, which underscores the need to implement effective policies that would foster more secure and stable labour conditions.”

ECLAC said that inflation in the economies of Latin America and the Caribbean has shown a downward trend after peaking in 2022.

It said from the 8.2 per cent recorded that year, the median regional inflation rate declined to 3.7 per cent in December 2023. It is estimated that in 2024, inflation will continue to ease, reaching 3.4 per cent.

Although median regional inflation has gotten close to the central value in many central banks’ target ranges (three per cent), the rate projected for 2024 continues to be above pre-pandemic levels.

“In the fiscal sphere, difficulties will exist for increasing fiscal revenue in the short term, while public spending is seen holding steady with a growing debt service burden. Thus, risks arise with regard to fiscal sustainability, linked to weak GDP growth, the high cost of financing and exchange rate fluctuations.”

According to the Preliminary Overview 2024, financial resource mobilisation ranks among the main policies for tackling the trap of low growth capacity. On the domestic front, public finances must be strengthened. This entails focusing efforts on increasing tax collection and increasing its progressivity, along with reducing tax evasion levels and carrying out cost-benefit evaluations of existing tax expenditures.

ECLAC is proposing strengthening the governance and the technical, operational, political and prospective capabilities (known as TOPP capabilities) of macroeconomic institutions.

Reforming the international financial architecture will also play a central role in boosting resource mobilisation capacity in the region.

It said this requires greater regional coordination to have an impact on global reforms that would facilitate access to resources for development.

In the realm of productive development policies (PDPs), ECLAC has stressed the need to implement “new-generation” policies to drive a productive transformation, which is necessary for escaping the trap of low growth capacity.

This, in turn, has highlighted the need to identify areas with high potential for invigorating growth, prioritising environmental sustainability, the impetus for science, technology and innovation, digitalisation, corporate financing and investment attraction. The need to take advantage of global value chains to diversify economies has been emphasised as well.

The report reiterates that ECLAC has identified 14 driving or transformative sectors, divided into three categories: industry, services and key areas for sustainability. These sectors are a priority for Latin American and Caribbean countries, since they have a high potential for invigorating growth and productivity.