The United Nations forecasts slow economic growth for Latin America and the Caribbean. ECLAC expects GDP to grow 2.4% in 2025. Growth should then reach 2.3% in 2026. This indicates a continuing trend of low expansion. The region faces a “trap of low growth capacity.” This outlook reflects an evolving global environment. However, underlying issues persist in many economies.
Regional Growth Trends
The Economic Commission for Latin America and the Caribbean (ECLAC) has updated its projections. The 2025 forecast represents an upward revision. It is slightly better than earlier estimates. However, the overall picture remains one of modest economic activity. If confirmed, this will mark four straight years of low growth. Average regional GDP growth for 2017-2026 is estimated at 1.6%. This sustained period highlights significant challenges.
Divergent Subregional Performance
Growth rates will vary across different subregions. The Caribbean subregion shows a mixed outlook. It is projected to grow significantly by 5.5% in 2025. For 2026, growth is forecast at 8.2%. This strong performance is driven by oil production in Guyana. Tourism is also normalizing. The construction sector is improving too. However, the Caribbean faces vulnerabilities. Natural disasters pose a constant threat. High energy import costs also impact its economies. Excluding Guyana, Caribbean growth is much lower. It is projected around 1.7% to 1.9% for 2025-2026.
Central America is expected to expand. Growth is forecast at 2.6% in 2025. It should increase to 3.0% in 2026. This subregion faces issues with trade. Remittances and financing are also concerns. Climate change presents ongoing risks. South America’s outlook is more varied. It is projected to grow by 2.9% in 2025. This is supported by recoveries in key economies. Argentina and Ecuador are rebounding. Brazil expects growth of 2.5% in 2025. However, many other South American countries may slow down. Mexico’s economy shows slower growth. It is forecast at 0.6% in 2025. Trade issues and the US economy influence this.
Underlying Factors Slowing Growth
Several factors contribute to this persistent low growth. External demand has decelerated. This limits export opportunities for the region. Domestic demand is also weakening. Private consumption is losing some strength. Global tensions and economic fragmentation create uncertainty. Inflation expectations remain a concern globally. This affects interest rate policies. It also influences currency values. Furthermore, productivity remains low across much of the region. Investment levels are also insufficient.
Labor Markets and Inflation Outlook
The region’s moderate economic performance impacts employment. Job growth is expected to slow. ECLAC projects employed persons will increase by 1.5% in 2025. This will slow to 1.2% in 2026. Formal employment creation is showing a slowdown. Labor informality and gender gaps persist. These remain significant structural challenges. Regarding prices, median inflation is expected to rise. It should reach 3.0% in 2026. This is higher than 2025 levels. However, it remains below 2021-2022 peaks. Central banks aim for these target ranges.
Implications for Business and Policy
This forecast presents a challenge for the business sector. Sustained low growth signals a need for adaptation. Companies must navigate weaker demand. Creating new jobs remains a priority. ECLAC stresses the need for productive transformation. Economies must diversify their offerings. Boosting productivity is essential. This requires increased investment. Policy makers face difficult decisions. They must preserve macroeconomic stability. Strengthening fiscal and monetary institutions is key. Promoting sustainable investment is also vital. The region needs to mobilize greater resources. This will help overcome development traps.
The Path Forward
The overall economic outlook for Latin America and the Caribbean remains cautious. The continuation of low growth is a central theme. However, resilience exists in specific sectors and countries. The news from ECLAC highlights both challenges and opportunities. A concerted effort is needed. This includes policy reforms. It also requires international cooperation. Ultimately, a deeper productive transformation is crucial. This can help unlock greater economic potential.