The UN released its projections for the world and regional economy this year: a pessimistic scenario in which that Latin America and the Caribbean They would achieve weak growth, even less than that of 2023.
According to the report “World Economic Situation and Prospects 2024” (WESP), the international organization predicts that the regional Gross Domestic Product (GDP) will grow by only 1.6%, after reaching an estimated growth of 2.2% in 2023.
Factors such as restrictive monetary conditions and its negative impact on aggregate demand; the drop in exports as a result of lower demand, mainly for China; and the few investments expected at the regional level due to structural vulnerabilities and political uncertainties.
“The limited fiscal space, the increases in public debt as a percentage of GDP and external debt costs “They are going to mean that the region will not have enough resources to invest in the major transformations that are needed: poverty reduction, energy transformation, climate change issues,” he explained. Natalie Gomezeconomist of the Resident Coordination Office of the United Nations System in Colombia in the presentation of the report.
Regarding global economic growth, the UN It is expected to slow from 2.7% in 2023 to 2.4% in 2024, with a trend lower than the growth rate prior to the Covid-19 pandemic of 3%.
“The prospects of a prolonged period of higher borrowing costs and tighter credit conditions create significant headwinds for a global economy that suffers from high levels of debt, but also needs greater investment, not only to resume growth, but also to fight against climate change and accelerate progress towards the Sustainable Development Goals (SDG)”says the text.
What economic scenario does the UN project for Uruguay?
The real GDP of Uruguay will grow by 2.8% this year (1.8% more than in 2023), a figure however lower than other economies in South America such as Paraguay, which will increase 4%. By 2025, the report of the UN predicts an acceleration of just 0.2% to 3%.
According to the inflation, the average forecast for this year is 5.5%. This is a value that exceeds the official forecast of the Central Bank of Uruguay (BCU) and the Ministry of Economy and Finance (MEF) which, through the Macroeconomic Coordination Committee, reported a stipulation of 4.9%.
Finally, the document on the “Situation and prospects of the world economy 2024 highlights the levels of competitiveness of the economies of the countries that are part of the UN. There being no projections for the current year, there are indicators closed to last year. In the case of Uruguay A minimal variation (80.8 in 2022 versus 79.6 in 2023) shows a slight recovery in competitiveness.
The message to central banks
The UNalthough it stands out that several central banks in Latin America led the cut in interest rates –Uruguay was the first of them in April -, warning of how tied local monetary policy is to the decisions of large entities such as the United States Federal Reserve (Fed) and the European Central Bank (ECB)both reluctant to start lowering reference rates.
On Wednesday, in that context, the dollar strengthened again globally, pushing down the rest of the variables in international markets: stocks, gold and oil.
“Central banks should strengthen international cooperation or coordination on monetary policy to minimize spillovers from the main central banks of developed countries, even when such cooperation may be extremely difficult,” recommended the UN.
Source: Ambito
