After six years of strong performance, Latin American and Caribbean economies will slow considerably next year as the global economic meltdown takes its toll on the region and unemployment rises, a United Nations agency for economic development announced today.
The gross domestic product (GDP) of the 33 Latin American and Caribbean countries will grow a projected 1.9 per cent in 2009, a marked drop from the 4.6 per cent rate a year earlier, according to preliminary figures from the UN Economic Commission for Latin America and the Caribbean (ECLAC).
Unemployment will increase to between 7.8 to 8.1 per cent next year, hitting low-income households and those headed by women the hardest and pushing many workers into the informal economy. However, inflation will slow to 6 per cent next year, from 8.5 per cent a year earlier.
“Today the region is better prepared than in previous occasions to handle a crisis, but in no case is it immune,” ECLAC said in a press release.
Developed and developing countries must coordinate macroeconomic steps and bolster intraregional trade and integration to manage the crisis, according to the UN commission. It also recommends that international agencies sufficiently finance counter-cyclical measures and that regional financial bodies inject liquidity into the global financial system.
Between 2003 and 2008, the region enjoyed healthy economic growth as employment expanded and poverty shrank, and most countries posted external and fiscal account surpluses.
But the international economic slowdown is already undoing those gains.
According to the report, foreign direct investment (FDI) will contract next year. Mexico and some Central American nations are already seeing exports slide. The drop in prices for fuel, metals, food and other basic goods will hinder trade prospects for the region, while the expected fall in tourism and remittances from migrant workers – both significant sources of revenue – will inhibit growth.
Scarce credit and the rising cost of external financing have caused a strong depreciation in local currencies in several countries, upsetting their balance sheets and thwarting efforts to slow inflation rates further, the Commission added.