IDB predicts ‘difficult’ 2023 for Latin America with just 1% growth

Latin America and the Caribbean will face a “difficult” 2023, with an estimated economic growth of just 1% due to “uncertainty” in the global scenario, the Inter-American Development Bank warned this Sunday (IBR).

“Overall, 2023 will be a difficult year for Latin America and the Caribbean, given the complexity of the global scenario and its significant uncertainty,” with growth of 1% if no new difficulties arise, according to the IDB’s 2023 macroeconomic report, presented by its chief economist Eric Parrado at the close of the organization’s annual meeting in Panama.

“In terms of specific economic growth in Latin America and the Caribbean, we estimate that growth will be around 1% for 2023. […]which is very little for the development tasks of our countries,” Parrado said.

Projection IBR This is less than the 1.8% growth forecast for the region this year by the International Monetary Fund (IMF) and the United Nations Economic Commission for Latin America and the Caribbean (Cepal) forecast of 1.3%.

assembly IBRwhich will end this Sunday at nightfall and bring together finance chiefs from countries in the region, comes amid fears of bankruptcy of three banks in the United States, including Silicon Valley Bank, as well as difficulties in the US First Republic and Swiss Credit Suisse .

He IDB it is even considering zero growth this year in the region if any “financial shock” occurs, Parrado said.

The gloomy macroeconomic report was released a day after the new president IBRIlan Goldfine, a Brazilian, confirmed that the economic outlook for Latin America and the Caribbean is clouded by “superimposed crises”.

“From the (covid-19) pandemic to the Russian invasion of Ukraine, with higher debts and record inflation, food and energy insecurity and, of course, the climate crisis,” the helmsman stressed. IBRnot including turbulence in the banking sector in his listing.

“Financial shock”

“Growth prospects for the region in 2023 seem less rosy than the recovery period of 2021 and 2022. This could increase the risk of gaps related to the region’s triple mission of improving social conditions, strengthening fiscal accounts and promoting long-term growth,” the IDB report said.

“The countries of Latin America and the Caribbean They face a year in which global demand could decline – offset in part by China’s reopening after its stringent coronavirus lockdowns – and high financial costs due to higher interest rates, he adds.

This panorama “awakens a serious specter of worsening poverty and inequality,” according to the report, which predicts the region will grow by 2% in 2024.

Parrado explained that the “financial shock” in Latin America and the Caribbean “could deliver 0% growth” this year.

“What do we do in the macroeconomic report IDB should have different types of scenarios. So we have a base case that is 1% by 2023, but we also have a tighter scenario where we look at real shocks or financial shocks,” Parrado said.

“And today the financial shock is somehow connected […] to the financial health of some banks in the US and some banks in Europe,” added the chief economist IDB.

(According to AFP)