SANTIAGO, Chile (CMC) – The Economic Commission for Latin America and the Caribbean (ECLAC) on Tuesday revised downwards the growth projection for the region’s economies in 2025.

According to the new estimates, the United Nations organisation forecasts that the region’s economies will grow two per cent on average this year, which is four-tenths lower than what was projected in December 2024.

By sub-region, the downward revision is greater for the Caribbean, where it is eight-tenths lower, excluding Guyana, and for Central America and Mexico, seven-tenths lower than it is for South America, where the downward revision is just one-tenth.

ECLAC said that the growth rates expected given the new revision are 2.5 per cent in South America, one per cent in Central America and Mexico and 1.8 per cent in the Caribbean, excluding Guyana.

According to ECLAC, the region is facing a very complex and highly uncertain international scenario.

It said the tariff-related announcements made by the United States not only have direct effects on what the region’s countries export to that economy, but they also have indirect effects via greater volatility in international financial markets, with significant fluctuations in stock and bond markets, which has clear implications for the yield of assets and of the interest rate in the United States and for the main global financial markets.

“These announcements and the geoeconomic confrontation sparked have increased the risk of severe disruptions in global production chains and in international trade flows. All these factors have prompted a downward revision for growth prospects at a global level and particularly among the region’s main trading partners: the United States and China,” ECLAC said.

It noted for example, the International Monetary Fund (IMF) in April downwardly revised its growth projection for the US from 2.7 per cent, which it had estimated in January, to 1.8 per cent; for the Euro zone, from one to 0.8 per cent, and for China from 4.6 to four per cent.

For the region, this has entailed significant changes to the macro conditions contemplated in ECLAC’s last annual economic report, the Preliminary Overview of the Economies of Latin America and the Caribbean 2024, published last December.

This includes a deceleration in external aggregate demand, which could prompt increased imbalances in external accounts in 2025 beyond what had been anticipated, an increase in exchange-rate volatility, and greater accumulation of international reserves for precautionary purposes.

Similarly, a deceleration is expected in domestic aggregate demand, where although private consumption will continue to be the main determinant of regional growth, its pace is expected to continue decreasing.

ECLAC said investment will show less dynamism than what was contemplated in the Preliminary Overview 2024, in accordance with the prospects for deceleration seen in global trade and particularly among the region’s main trading partners, and the greater uncertainty being shown by the global economy.

“However, there is an intensification in the region of the major challenge of reversing the path of low economic growth it has shown in the last decade, ECLAC indicates.

“Invigorating growth requires a combination of more proactive macroeconomic and productive development policies than those the region has had up to now, increasing investment in physical and human capital, and putting productive development agendas into practice in dynamic driving sectors.

“That is why the region not only must invest more, but it also must invest better. This involves adopting new technologies, promoting cluster initiatives and good business practices, fostering deep improvements in the process of capital accumulation, and properly harnessing economies’ social and environmental capital,” ECLAC said.