Chinese Cooldown Hits LATAM Economies; Costa Rica and Panama Achieve Growth, Nevertheless

With the exception of Panama and Costa Rica, 2023 was marked by a slowdown for Latin American countries reliant on China’s economic performance, according to the annual study by the Economic Commission for Latin America and the Caribbean (ECLAC).

Chile and Colombia, heavily exposed to the Chinese market, experienced sluggish growth. Chile eked out a meager 0.1% growth, followed by Peru (0.3%) and Colombia (0.9%).

ECLAC highlighted dependence on China as a major factor for slowdown, noting that “39% of Chile’s goods exports, 32% of those of Peru and Panama, and 27% of those of Brazil and Uruguay are directed to that country.”

What is the economic forecast for the #Caribbean heading into 2024?

A new report from @eclac_un projects a deceleration in growth from the levels seen in 2022, with Caribbean economies (excl. Guyana) growing by 2.6%—a drop from 3.4 in 2023.

Learn more 👉 https://t.co/KjRKSEUfiD pic.twitter.com/GAvxhkVgZ5

— United Nations Caribbean (@CaribbeanUN) December 26, 2023

Argentina’s economy suffered the most, even surpassing Haiti, largely due to crippling inflation and currency volatility.

In contrast, Panama emerged as the regional leader, boasting a robust 6% growth, propelled by sectors like construction, transport and logistics, tourism and mining. ECLAC made no mention on why Panama had such a strong showing in spite of its reliance on the Chinese economy.

Costa Rica followed suit with a commendable 4.9%. Paraguay (4.5%), Mexico (3.6%), and Guatemala (3.4%) also showed resilience.

The block which includes Central America and Mexico is estimated to have grown 3.5% in 2023 (down from 4.1% in 2022). Estimates for the Caribbean (excluding Guyana) put growth at 3.4%, a significant drop from the previous year’s 6.4%.

Despite a welcome decline in inflation, interest rates in developed economies remain stubbornly high. This translates to sustained financing costs for Latin America, a trend expected to continue in the coming years.

Across the region, inflation averaged 3.8%, a significant improvement over the 8.2% recorded in 2022. This downward trend is expected to continue in 2024, with an estimated average inflation of 3.2%.

Job creation paints a less optimistic picture, however. ECLAC estimates a 1.4% increase in employed persons in 2023, a stark drop from the 5.4% recorded in 2022. This trend is projected to continue in 2024, with a mere 1.0% growth in employment.