UN predicts a modest rebound for Latin American & Caribbean economies in 2017

A United Nations report is predicting that after contracting for two consecutive years, the economies of Latin America and the Caribbean are expected to return to positive growth in 2017.

But the World Economic Situation and Prospects 2017 Report released here this week warned that significant external and internal headwinds will persist.

Ecuador’s banana exports should grow in 2017.

The report shows that world gross product grew by just 2.2 percent in 2016, marking the slowest pace of expansion since the Great Recession of 2009. Global growth is projected to improve moderately to 2.7 percent in 2017 and 2.9 percent in 2018, but this is more an indication of economic stabilization than a signal of a robust revival of global demand.

Against this backdrop, growth domestic product in Latin America and the Caribbean is expected to grow by 1.3 percent in 2017 and 2.1 percent in 2018, following an estimated contraction of 1 percent in 2016.

The report notes that the modest recovery is expected to be supported by a pickup in external demand, an increase in commodity prices and some monetary easing in South America amid lower inflation.

In the Caribbean, the economic situation and prospects vary widely across countries.

The Dominican Republic and Guyana are expected to remain the strongest performers with the report predicting that the outlook is less favorable in the Bahamas, Cuba and Trinidad and Tobago – countries with deep-rooted structural impediments and high vulnerability to external developments.

In Ecuador, a new trade agreement with the European Union should boost exports, especially in the banana, seafood, and flower markets.

But the report cautions that there are significant risks to the global and the regional outlook. Among other issues, it highlights the high degree of uncertainty in the international policy environment and elevated foreign currency-denominated debt levels as key downside risks that may derail global growth.

“For Latin America and the Caribbean, major risk factors are a sharper-than-expected slowdown in China, the potential adoption of protectionist measures by the new administration in the United States and renewed financial market turbulences,” the report stated. “The latter could, for example, be triggered by a faster-than-expected pace of interest rate hikes in the United States.”

The report notes that the medium-term growth outlook for many Latin American and Caribbean economies is clouded by persistent structural weaknesses, including a high dependence on commodities and low productivity growth.

It said a prolonged period of weak growth could pose a threat to the social achievements of the past decade and complicate the region’s path towards the achievement of the Sustainable Development Goals.

The report calls for a reorientation of macroeconomic and other policies to more effectively promote investment in physical and human capital and strengthen innovative capacities across the region.

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Credit: The Antigua Observer, http://antiguaobserver.com