SANTIAGO, Chile (CMC)— The United Nations Economic Commission for Latin America and the Caribbean (ECLAC) is predicting that economic growth will decelerate in Latin America and the Caribbean next year.

ECLAC forecasts 3.2 per cent growth in 2022, above what had earlier been forecast. But it said it expects the deceleration to intensify next year with growth of 1.4 per cent in 2023, describing the situation as “a scenario subject to significant restrictions, both external and domestic”.

“The war between Russia and Ukraine negatively affected global growth – and with it, the external demand faced by the region this year – while also accentuating inflationary pressures, volatility and financial costs,” the statement said.

“Greater risk aversion, along with more restrictive monetary policy on the part of the world’s main central banks, harmed capital flows to emerging markets, including Latin America, while also fostering local currency depreciations and making it more onerous for the region’s countries to obtain financing,” ECLAC said.

According to ECLAC, in 2023, Latin American and Caribbean countries will have to face an “unfavourable international context once again, with forecasts for a deceleration in both global growth and trade, higher interest rates, and less global liquidity”.

On the domestic front, ECLAC said regional countries will confront a complex environment for a fiscal and monetary policy again in 2023.

In terms of monetary matters, ECLAC reported the increase is in inflation-led central banks in the region, as in much of the world, to raise policy rates – in some cases, substantially – and to reduce the growth of monetary aggregates.

“Although it is foreseen that this process will come to an end in 2023 – to the extent that inflation expectations are effectively anchored in countries – the effects of this restrictive policy on private consumption and investment will remain present during 2023,” ECLAC said.

In the fiscal sphere, it said public debt levels will remain high in a large number of countries.

“In a context of high demand for public spending, measures will be needed to strengthen fiscal sustainability and to expand fiscal space by bolstering public revenue,” ECLAC said.

All the sub-regions are seen experiencing lower growth next year, according to ECLAC’s new projections, with the Caribbean growing by 3.1 per cent, (not including Guyana, whose economic growth was 4.3 per cent in 2022).

In Caribbean economies, ECLAC said inflation has affected not only real income and, therefore, consumption, but also production costs, with a negative impact on the competitiveness of exports involving both goods and tourism.