Washington, – A combination of economic impacts of the world’s major economies in the region could shorten growth in Latin America and the Caribbean to an average of 0.8% between 2019 and 2021, the Inter-American Development Bank (IDB) said today. your macroeconomic report.
The IDB cut its forecasts for the region by 1.7%, mainly due to the possible effect of the slowdown in the United States and China, and a hypothetical increase in the interest rates of the US Federal Reserve (Fed).
The study also evaluates the potential impacts on Latin America and the Caribbean caused by a “brexit” without agreement, which could reduce the region’s development projections by an additional half percentage point.
“The potential impacts are alarming because Latin America and the Caribbean is already among the regions with the slowest annual growth rate in the world,” Eric Parrado, the IDB’s chief economist, said in the report.
According to the development bank, the slowdown in the US economy may have a negative impact of 0.8% in Latin America, while China’s lower development will affect 0.5% in the three years studied.
These two factors, added to an impact of 0.4% of the price of assets, will result in a decrease in regional GDP growth of 1.7%, to 0.8%, for the period between 2019 and 2021.
The area of the region that will be most affected by the impact of the United States and China will be the Southern Cone (excluding Brazil), whose economy can contract by 0.4%.
For its part, Mexico will grow 0.5% in the three-year period and Brazil 0.8%.
However, Parrado pointed out that the IDB has set a course “whereby the region can obtain a great economic boost through investments in transport, telecommunications and other necessary infrastructure works”.
In this way, the report emphasizes that although public investment is held back by limited budgets, the opportunities for obtaining private financing are “broad in a context of low interest rates throughout the world.”
For the region on average, the calculations indicate that if countries are able to increase their investment levels in the infrastructure sectors enough to close the gap with countries of the Organization for Economic Cooperation and Development (OECD), the productivity in the whole economy would grow 75% with respect to the historical average (EFEUSA).