This year 2023 begins with an international panorama marked by uncertainty, with the United States, China and Europe facing major economic crises, leaving Latin America and the Caribbean to survive with the inflationary pressures caused by the dollar and the euro, in addition to addressing the problems that concern each of these countries in their daily lives.
Although it is true that inflation may be lower in 2023 than last year, it is still a reality that can force many countries in Latin America and the Caribbean to enter into a kind of economic slowdown, since this situation It is often accompanied by very poor economic growth.
Countries like Argentina, Colombia and Chile are likely to experience annual contractions, that is, general reductions in goods and services in specific markets. By contrast, Brazil and Mexico are likely to avoid these contractions, but they will continue with mild technical recessions and their annual growth will be minimal.
The Dominican Republic stands out as the great exception, since it is projected to be the country that will grow the most in the Region, and it is due to the fact that the forecasts for the economic growth of our country for this 2023 amount to 4.5%, according to with data from the World Bank (WB).
The reasons why the aforementioned is forecast are the dynamism in the external sector vis-à-vis the country, greater diversification of the national productive network, accurate adjustments in the monetary policy rate by the Central Bank to avoid capital flight and maintain stability. national economy. In this regard, it is important to highlight the recent release of legal reserve resources for the channeling of loans for the construction and acquisition of low-cost housing, placed at fairly soft rates, seeking to keep economic agents and the general public built.
In addition, the exorbitant work of the same construction and tourism sector, jointly contributed a third of the economic growth that the country experienced in 2022, and that industry and transport project to exceed by far in 2023. Likewise, it should be noted that as a result of all this, unemployment levels will remain stable with a tendency to decrease.
Economic development in Latin America and the Caribbean
With lower prices for raw materials, as well as increasingly strict monetary and fiscal policies, a global slowdown would be encouraged, which, in turn, would mitigate growth in the Region, despite the fact that the Economic Commission for Latin America (CEPAL) projected a growth of 1.3% for Latin America and the Caribbean.
Similarly, the International Monetary Fund (IMF) forecasts the same type of growth, emphasizing that there is perceived social unrest in large sectors of Latin America, which may lead to a more pronounced slowdown. The World Bank also does not differ from the projections of the IMF and ECLAC due to the high interest rates, the decrease in the price of raw materials, the low economic growth of China and the Russian-Ukrainian war that continues to affect the everyone directly and indirectly.
And it is not for more, as the growth of the countries that are trading partners in the Region and those that serve as world leaders in economic issues weakens and, they begin to make decisions to counteract the effects on the integrity of their financial systems , will affect Latin American countries more strongly than normal, thus tightening their financial conditions.
As growth does not return to pre-COVID-19 levels and social inequality deepens, the risks of a recession and fiscal deterioration driven by political and social pressures continue to rise.
The new politics and economy in Latin America and the Caribbean
Political factors have always been closely related and influenced by economic developments. Perhaps we can expect that the biggest event for this year in the Region will be to see how successful or not the governments that have emerged while dealing with serious macroeconomic, political and immigration problems are, in their attempts to address the promises to the voting population.
Coupled with this, we have the resurgence of left-wing governments, which would eventually imply greater tax burdens, the improbability that these governments will continue the widespread expropriations and renegotiations of contracts carried out by their predecessors, and the tendency for the vast majority of these governments not to have control of their legislative congresses, thus reducing the scope and diluting anti-business policies, with the exception of Mexico.
Probably one of the biggest challenges facing left-wing governments in the Region is reconciling the demands of the majority of the population with the interests of private investors and political elites. And, looking at it from a social policy point of view, it is essential to promote investment and productivity, job creation, reduce informality and inequality; always relying on the adaptation and mitigation of risks, as well as looking for new legal-financial vehicles that allow them to achieve these tasks.
Faced with inflation as such, if the world does not suffer from sudden and atypical changes as we have experienced during the last 2 years, the estimate is that the main economies of Latin America and the Caribbean, except Colombia, will begin to cut interest rates in the second half of the year. However, the conditions for placing financing in general will continue to be very restrictive.
As economic growth continues to lean more toward the slowdown, commodity prices continue to weaken, and food and energy manage to return to square one, inflation in Latin America and the Caribbean is likely to close at 4.1%, that is. , half of what we incurred last year.