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Financial News

May 2014 Financial News

Eclac predicts 2.7 per cent growth for region

May 01, 2014

Latin American and Caribbean countries will grow an average of 2.7 per cent in 2014 due to limited dynamism of the region’s principal economies, according to new projections from the Economic Commission for Latin America and the Caribbean (Eclac).

The regional United Nations organization released its Updated Economic Overview of Latin America and the Caribbean, which reviews information on the key economic variables of 2013 and presents new growth estimates for the region.

It says that the 2014 regional growth rate would be slightly higher than 2013 (2.5 per cent), but lower than the rate forecast in December (3.2 per cent), due to an external context still marked by uncertainty and lower growth than expected for the region’s larger economies, Brazil and Mexico, which will expand by 2.3 per cent and 3 per cent, respectively.

Eclac said the United States’ recovery will have a positive impact on the economies of its closest neighbours, especially Mexico and Central America, considering its importance as a trade partner. At the same time, the upturn of developed countries will benefit Caribbean nations more specialised in service exports due to better performance by the tourism sector.

St Kitts and Nevis will grow by 3.1 per cent, Bahamas 2.5 per cent, Saint Vincent and the Grenadines 2.3 per cent and T&T 2.1 per cent, the same figure projected for the whole group of Caribbean countries.

The perspectives for the year show a global scenario with lower liquidity, which entails important challenges in matters of macroeconomic policy and external financing for the Latin America and the Caribbean region, the report said. In addition, the economic growth projection was reduced for Argentina (1 per cent), a country that took several steps in early 2014 to counter the imbalances of recent years, causing its economy to contract.

Likewise, the impact of Venezuela’s complex economic situation will result in a contraction of -0.5 per cent of that nation’s activity.

Nevertheless, highly varied expansion levels are predicted for the region’s countries. According to the Updated Economic Overview, Panama, Bolivia, Peru, Ecuador, Nicaragua and the Dominican Republic will have growth figures equal or higher than 5 per cent, while a significant number of nations will register expansion of between 3 per cent and 5 per cent.

In its report, Eclac says activity indicators for developed countries—especially the United States, United Kingdom, Korea, Germany and several others from the euro zone—have shown a recovery.

There is caution, however, on the situation in China, one of theregion’s main trade partners, which set a minimum growth goal of 7 per cent for this year. In addition, the demand for commodities is forecast to remain limited, especially mining and food products, which, combined with currency appreciation in developed countries, would cause commodity prices to drop modestly. The decrease would affect the economies that export these products, like those of South America.

In terms of inflation, while there are no sharp changes expected, a rise in the regional average is forecast due to the indexing changes in Argentina, the moderate rise in several countries’ prices and the high indicators shown by Venezuela.

This regional increase was already observed during the first two months of 2014, when average accumulated regional inflation over 12 months rose to 7.6 per cent compared to 7.3 per cent last December.

In this context of modest regional economic growth, there will not be a meaningful recovery of employment levels.

Eclac emphasizes this could translate into an increase in unemployment rate—which in 2013 registered a new minimum of 6.2 per cent—only if the drop in labour force participation seen last year is reverted.


Source:
Business Guardian A29
Thursday May 1, 2014
www.guardian.co.tt