December 20, 2024
Economies in Latin America and the Caribbean are projected to grow by 2.4% in 2025, driven primarily by domestic consumption, though this growth may be tempered by the risk of escalating global geopolitical and trade tensions, according to the United Nations on Wednesday.
The UN’s Economic Commission for Latin America and the Caribbean (ECLAC) raised its growth projection from 2.3% in August but noted that the region would continue on a “low growth trajectory.” The report highlighted that private consumption would remain the main driver of growth, similar to 2024, but with “a more moderate expansion.”
ECLAC also revised its regional growth forecast for this year to 2.2%, up from 1.8% in August. Employment is expected to see slight growth in 2025, despite a weak labor force participation rate compared to pre-pandemic levels and persistent gender inequality.
The agency identified the main risks to the region’s economies as intensifying geopolitical and trade tensions, which could impact raw material prices and complicate shipping routes and transport logistics. ECLAC projected that the gross domestic product (GDP) of Brazil, the largest economy in Latin America, would grow by 2.3% in 2025, while Mexico’s GDP is expected to grow by 1.2%, and Argentina’s by 4.3%.
Countries in Latin America and the Caribbean are experiencing a downward trend in inflation, which, combined with monetary easing in the United States, has enabled rate-setters to reduce interest rates in a “heterogeneous and cautious” manner. However, ECLAC emphasized that the outlook for investment remains discouraging due to weak public spending.
“Gross fixed capital formation is expected to continue to contract, raising concerns about its role in sustaining medium- and long-term growth in the region’s economies,” the report stated. On a positive note, exports and imports of goods and services are expected to recover in 2025 compared to 2024.
Source: (Reuters)
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