The World Bank raised its 2023 economic growth forecast for Latin America and the Caribbean to 2%, up from a previous estimate of 1.4%, citing cooling inflation and a steady drawdown of interest rates.
The bank praised the policy responses of some countries in the region for helping to drive the economic recovery, noting that the region is recouping losses from the pandemic.
However, the region cannot see rapid growth in the near future, largely due to cash shortages in some countries. There are some positive signs, such as declining interest rates in many major economies, including Brazil, Chile and Uruguay.
Additionally, the region’s debt-to-GDP ratio has fallen to 64% this year from 67% a year ago. However, servicing foreign debt could become challenging if the US dollar surges on the back of rising interest rates, the bank noted.
The international lender urged the regional governments to improve digital connectivity and overhaul agricultural policies to boost their economies.
Digital connectivity can drive economic growth by opening up new opportunities for innovation and productivity.