New UN report foresees low growth rates for Latin America, Caribbean in 2001

New UN report foresees low growth rates for Latin America, Caribbean in 2001

With growth rates down to 2 per cent, or about half of what they were last year, 2001 is shaping up to be a disappointing year for the countries of Latin America and the Caribbean, according to the most recent estimates from the United Nations office in the region.

The Economic Commission for Latin America and the Caribbean (ECLAC) said in a statement that this year's lower growth rate could prove even more adverse if there were no clear turnaround in trends affecting the world economy.

According to ECLAC's report, Economic Survey of Latin America and the Caribbean 2000-2001, lower GDP growth will push fiscal deficits to around 3 per cent of GDP, while inflation should drop again, to an average of 7.5 per cent in 2001. Unemployment is expected to remain at almost 8.5 per cent, while the current account deficit should reach 3 per cent of regional GDP - about $58 billion.

The region will feel the effects of the slowdown in world growth this year, due to slower growth in the United States, Europe, developing countries in Asia, and troubles in Japan's economy. Domestic factors, particularly weak domestic demand and credit in several countries, electric power supply problems in Brazil, and political difficulties in some countries have also contributed.

A marked slowdown in world trade has also influenced the unfavourable external climate, causing the economies of Latin America and the Caribbean to face less demand and lower prices for their exports, the report says. The main effect on the region has been declining export growth. Trade and current account deficits will rise because imports continue to climb relatively quickly in several countries, although by the second half of 2001 this trend should slow.

The region also continues to face problems associated with the reduced availability and high cost of external financing. Overall, capital flows into Latin America and the Caribbean should reach almost $60 billion in 2001, which is similar to the average observed during the 1998-2000 period. The main component will be foreign direct investment and, to a lesser degree, official financing.