Economic growth in Latin America, Caribbean seen slowing in 2023

SANTIAGO (Reuters) – The expansion of economies in Latin America and the Caribbean is seen cooling next year, the United Nations economic commission for the region (ECLAC) said on Thursday, with both internal and external challenges weighing on growth.

Overall, the combined region is estimated to grow 1.3% in 2023, according to ECLAC’s forecast.

The 2023 projection is slightly down from 1.4% growth estimated in October, while ECLAC expects the region’s economies to expand by 3.7% this year, up from a previous forecast of 3.2%.

Slowing growth in Latin America and the Caribbean comes at a time of “restrictive monetary policies, greater limitations on fiscal spending and lower levels of consumption and investment,” ECLAC said in a statement.

The U.N. body pointed to the deterioration of external factors like the war in Ukraine as affecting the projections for the region.

“An increase in global inflation has caused increases in financial volatility and in levels of risk aversion,” ECLAC said, and higher prices in turn induced “lower capital flows to emerging economies, including the region’s economies.”

Lower inflation rates expected during the second half of this year, along with a slowdown in economic activity expected to continue next year, will likely reduce the pressure on monetary authorities to continue raising rates, according to the ECLAC statement.

Brazil, Latin America’s top economy, will likely grow 0.9% in 2023, down from a 2.9% expansion expected for 2022.

Mexico, the region’s No. 2 economy, is seen advancing 1.1% next year, down from 2.9% seen for 2022.

Meanwhile, Colombia’s economy is expected to grow by a much slower 1.5% next year, compared to an 8% expansion this year.

The country that will experience the fastest economic growth in the region next year is tiny Guyana, expanding by a whopping 30%, while Chile’s economy is seen shrinking 1.1% in 2023.

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