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World Bank Group Projects Strengthened Growth for Caribbean for Late 2024 into 2025

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by Kevon Browne

St. Kitts and Nevis (WINN): The World Bank Group has released its Global Economic Prospects report for Latin America and the Caribbean (LAC), forecasting economic performance for the remainder of 2024 and into 2025. The report details recent developments and future outlooks, providing insights into the region’s economic trajectory.

Recent Developments

In the latter part of 2023, LAC will experience a slowdown in economic growth due to the lingering effects of monetary tightening. Early 2024 showed some signs of economic stabilisation, but the recovery has been uneven across the region. Brazil and Mexico maintained positive business confidence, with Colombia improving, while Argentina faced a significant economic contraction.

Inflation rates across LAC are generally decreasing, and central banks have started to reduce policy interest rates from their high levels in 2023.

Outlook for 2024 and 2025

The World Bank projects that growth in LAC will decline to 1.8% in 2024 before increasing to 2.7% in 2025 as interest rates normalise and inflation decreases. Commodity prices are expected to support LAC exports, although subdued growth in China could limit demand for critical commodities.

Brazil: Growth is forecast to moderate to 2.0% in 2024 and 2.2% in 2025, supported by policy rate cuts and a private consumption and investment recovery.

Mexico: Projected growth will slow to 2.3% in 2024 and 2.1% in 2025, constrained by tight monetary policy despite anticipated reductions in inflation and interest rates.

Argentina: Expected to contract by 3.5% in 2024 but rebound with 5.0% growth in 2025 as economic imbalances are addressed and inflation decreases.

Colombia: Growth is expected to increase to 1.3% in 2024 and 3.2% in 2025, driven by recovering private consumption and exports.

Chile: Forecasted growth of 2.6% in 2024 and 2.2% in 2025, supported by robust external demand for green energy commodities and interest rate cuts.

Peru: Projected to grow by 2.9% in 2024 and 2.6% in 2025, with declining inflation and policy rate cuts bolstering private consumption.

Caribbean Economic Prospects

The Caribbean is expected to see significant economic growth, with projections of 7.1% in 2024 and continued robust performance at 5.7% in 2025. Excluding Guyana, growth in the Caribbean is forecast at 3.9% in 2024 and 4.0% in 2025, driven by moderate tourism recovery and remittances. Central America’s growth is projected to weaken to 3.2% in 2024 but recover to 3.5% in 2025 with faster remittance growth.

Risks

The forecast is subject to several risks, predominantly to the downside. These include potential tighter global financial conditions, elevated local debt levels, and a slowdown in China’s growth, which could impact LAC’s exports. Additionally, climate change-related extreme weather events present significant risks. Conversely, more robust economic activity in the United States could positively impact Central America and the Caribbean.

LAC is expected to face economic challenges in 2024, but a gradual recovery is projected for 2025, supported by declining inflation and accommodative monetary policies. Domestic and international factors will influence the region’s financial performance, with commodity prices and global demand playing significant roles. The Caribbean is projected to achieve robust growth, driven by tourism and remittances, reflecting a positive economic outlook amid broader regional challenges.

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