Economies of Latin American and Caribbean countries will grow by an average 3% in 2013, forecasts ECLAC in an economic survey report unveiled this week. The UN agency had estimated 3.5 percent growth for the region in a similar report published last April.
Overreliance on commodity export and rising current account deficit (reaching 2.0% of GDP in 2013) are the major fiscal constraints the region is facing. Furthermore, economic growth remains largely dependent on consumption, which in 2013 has expanded less than in the previous year.
The region is importing more than it exports. More worrying still, ECLAC says the commodity boom period appears to be ending.
“The current situation highlights problems of growth sustainability in most of the region’s economies, hence the need to broaden and diversify sources of growth,” stated Alicia Bárcena, Executive Secretary of ECLAC, in a press release.
According to ECLAC estimates, Paraguay leads growth in 2013, with a 12.5% rise in GDP, followed by Panama (7.5%), Peru (5.9%), Bolivia (5.5%), Nicaragua (5.0%) and Chile (4.6%). Argentina is expected to grow by 3.5%, Brazil by 2.5% and Mexico by 2.8%.
Central America should grow by 4.0%, while South America is expected to grow by 3.1%. The Caribbean is expected to maintain the slow upward trend in growth observed in previous years (to reach 2.0%).
In the first six months of 2013, prices for many of the region’s exports dropped, particularly minerals, metals, oil and some foodstuffs. “This trend is associated with the euro zone recession and the slowdown of growth in China,” says the report from the UN agency.
ECLAC says labor demand may not rise significantly in 2013 because of the moderate economic growth. Unemployment dipped from 6.9% to 6.7% in the first quarter of 2013, while 12-month cumulative regional inflation to May 2013 stood at 6.0% (compared with 5.5% in December 2012 and 5.8% in the 12 months to May 2012).
Despite the positive terms of trade, capital accumulation has been insufficient and there have been limited gains in labor productivity, the report points out.
The UN Agency says macroeconomic policies – fiscal, monetary and foreign exchange policies – could make a vital contribution to increase growth in the future.