Latin America and the Caribbean will face a “difficult” year 2023, with an estimate of economic growth of barely 1% due to “uncertainties” in the global scenario, warned this Sunday the Inter-American Development Bank (IDB).
“In general, 2023 will be difficult for Latin America and the Caribbean, given the complexity of the global scenario and its significant uncertainties,” with growth of 1% if no new difficulties arise, the IDB said in its 2023 Macroeconomic Report, presented by its chief economist, Eric Parrado, during the closing day of the organization’s annual meeting in Panama.
“On the side of the specific economic growth of Latin America and the Caribbean, what we estimate for 2023 is that growth will be around 1%. […]which for the development challenges of our countries is very low”, Parrado said.
IDB projections
The IDB projection is less than the 1.8% growth forecast for the region this year by the International Monetary Fund (IMF) and the 1.3% forecast by the UN Economic Commission for Latin America and the Caribbean (ECLAC). .
The IDB assembly, which culminates this Sunday at dusk and brings together finance managers from the countries of the region, is taking place amid concerns over the bankruptcy of three banks in the United States, including Silicon Valley Bank, as well as difficulties in the American First Republic and the Swiss Credit Suisse.
The IDB is even considering the possibility of 0% growth this year in the region if there is any “financial shock,” Parrado said.
The grim Macroeconomic Report was released a day after the new IDB president, Brazilian Ilan Goldfajn, stated that the economic prospects for Latin America and the Caribbean are clouded by “superimposed crises.”
“From the (covid-19) pandemic to the Russian invasion of Ukraine, with higher debts and record inflation, food and energy insecurity and, of course, the climate crisis,” stressed the helmsman of the IDB, without including in his enumeration the turbulence in the banking sector.
“Growth prospects for the region in 2023 appear less rosy than the recovery period of 2021 and 2022. This could increase the risk that the gaps associated with the region’s triple challenge of improving social conditions, strengthening accounts fiscal and promote long-term growth,” says the IDB report.
Bad year
“Countries in Latin America and the Caribbean face a year in which global demand may be depressed – partially offset by China’s reopening after its strict covid-related lockdowns – and high financial costs” by the increase in interest rates, he adds.
This panorama “awakens the serious specter of the deterioration of poverty and inequality,” says the report, which forecasts that in 2024 the region would grow 2%.
Parrado explained that a “financial shock” in Latin America and the Caribbean “could generate 0% growth” this year.
“What we do in the IDB macroeconomic report is have different types of scenarios. So we have the baseline scenario, which is 1% by 2023, but we also have a more stressed scenario, where we consider real shocks or financial shocks,” Parrado said. .
“And today the financial shock is somehow associated […] to the financial situation of some banks in the United States and some banks in Europe,” added the IDB chief economist.
Source: Ambito
