Latin American Economy to Contract by 0.6% in 2016

The Economic Commission for Latin America and the Caribbean (ECLAC) has revised downward its growth projections for the region’s economic activity, forecasting a contraction of -0.6% in 2016. Some countries in Latin America are already in recession, and this report confirms that their economic crisis will extend through the current year.
The factors contributing to Latin America’s trouble include low growth in developed countries, a significant deceleration in emerging economies (China in particular), increasing global and costs in financial markets, and low prices for commodities — especially hydrocarbons and minerals.
What is dampening the hope is that domestic investment is declining in many countries, as is consumption. There is little room for some countries to stimulate the economy.
The economies of South America — most of which are specialized in the production of commodities, especially oil and minerals, and have a growing degree of trade integration with China — will record a contraction of -1.9%.
“The growth rate for Central American economies is forecast at 3.9%, below the figure registered in 2015 (4.3%),” stated ECLAC in the report. “If Central America and Mexico are taken together, projections for 2016 are 2.6%, below the 2.9% reached in 2015. For the English- or Dutch-speaking Caribbean, estimated growth will be around 0.9% in 2016.”
This new scenario is also the result of fiscal policy adjustments in some economies of this subregion, the organization says.
The agency has urged regional countries to protect the social gains achieved in recent years and avoid rollbacks in the face of a lower economic growth scenario. In this context, the organization indicates that countries need policies that sustain social and productive investment in the framework of smart fiscal adjustments.
ECLAC says it is necessary to attain sustainability in the region’s public finances, with policies that take into account the impact on growth capacity in the long term as well as the social conditions of the region’s inhabitants.