Significant economic slowdown in 2023

WASHINGTON, CMC –The World Bank said Tuesday that Latin America and the Caribbean (LAC) experienced a significant economic slowdown last year, growing just 2.2%.

In its latest “Global Economic Prospects,” report, the World Bank said that this deceleration came in the context of heightened inflation and tight monetary.

The Washington-based financial institution said the economic outlook for the region suggests a gradual recovery, with growth projected to increase to 2.3% in 2024 and 2.5% in 2025.

“While the lingering effects of previous monetary tightening will continue to influence near-term growth, their impact is expected to diminish. As inflation slows, central banks are expected to reduce interest rates, alleviating obstacles to investment growth.”

The bank said excluding Guyana, which is experiencing a resource boom, Caribbean economies are expected to grow by 4.1% in 2024 and 3.9% in 2025, partly due to the ongoing expansion of the tourism sector.

According to the bank, the Bahamas will register growth of 4.3% in 2023, dropping to 1.8% next year and 1.6% in 2025.

Barbados which registered growth of 4.6% last year, will record 4 and 4% growth over the next two years, while Belize’s 4.5% growth last year is predicted to fall to 3.5 and 3.3% in the next two years.

The World Bank said Dominica registered a growth of 4.9% last year and will record growth of 4.6 and 4% in the next two years, while Grenada’s 3.9% growth last year, will dip slightly to 3.8 and 3.5 for the years 2024 and 2025.

The Financial institution said Haiti, which has registered a negative economic growth of 2.5%, will continue to record positive growth over the next two years of 1.3 and  2.2% respectively.

Guyana, which recorded growth of 29% last year, is predicted to register growth of 38.2% next year and 15.2% in 2025.

Jamaica’s economic growth of 2.3% last year, is predicted to decline slightly to two and 1.4% over the next two years, while St. Lucia’s 3.2 economic growth in 2023, will decline to 2.9 and 2.3% over the next two years.

The World Bank said St. Vincent and the Grenadines is expected to register growth of 4.8 and 3.7 over the next two years, down from the 6% it recorded in 2023, while Suriname’s growth of 2% last year, is expected to grow 2.6 and 3% over the next 2 years.

The World Bank said that in the long term, the region faces persistent challenges.

“The potential for economic growth is declining amid a slowdown in total factor productivity and an ageing population.” 

The World Bank said the projected modest regional expansion is beset by risks. It said escalating geopolitical tensions, especially in the Middle East, could disrupt energy markets and cause oil prices to surge.

Extreme weather events, intensified by climate change, present additional risks, particularly to climate-sensitive sectors such as agriculture, energy, and fishing.

“External factors and global trends also contribute to the risk landscape. Persistent core inflation in advanced economies could be accompanied by persistently high global interest rates, constraining monetary and fiscal policies in the region.

“Furthermore, a sharper-than-expected slowdown in China’s growth could have notable spillovers to external demand, impacting the region’s commodity exports,” the World Bank added.

In the report, the World Bank said that as the world nears the midpoint of what was intended to be a transformative decade for development, the gross domestic product (GDP) growth in 30 years.

“By one measure, the global economy is in a better place than it was a year ago: the risk of a global recession has receded, largely because of the strength of the US economy. But mounting geopolitical tensions could create fresh near-term hazards for the world economy,” said the report.

It said the medium-term outlook has darkened for many developing economies amid slowing growth in most major economies, sluggish global trade, and the tightest financial conditions in decades.

Global trade growth in 2024 is expected to be only half the average in the decade before the pandemic. Meanwhile, borrowing costs for developing economies, especially those with poor credit ratings, are likely to remain steep with global interest rates stuck at four-decade highs in inflation-adjusted terms.

Global growth is projected to slow for the third year in a row, from 2.6% last year to 2.4% in 2024, almost three-quarters of a percentage point below the average of the 2010s.

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