Latin America, Caribbean economies growing

Published: Monday September 8, 2008

In spite of the deteriorating international economic scenario, Latin America and the Caribbean will this year complete six consecutive years of growth, with Gross Domestic Product (GDP) rising 4.7 per cent.

This is one of the conclusions of the Economic Survey of Latin America and the Caribbean 2007-2008, Macroeconomic policy and volatility, conducted by the Economic Commission for Latin America and the Caribbean (ECLAC).

The report noted that although growth in 2008 will be lower than the 5.7 per cent in 2007, GDP per capita will rise over three per cent in the region for the fifth consecutive year. This has not occurred in the economic history of Latin America and the Caribbean for 40 years.

Consistent with the results of the economic activity in the region, the ECLAC report highlights the significant improvement in labour market indicators. Unemployment rates have fallen gradually since 2003, reaching eight per cent in 2007, with an estimated 7.5 per cent in 2008.

Poverty in the region also continued to go down, the survey found, having dropped over nine per cent since 2002.

“This is due to economic growth, lower unemployment, and better quality jobs, as well as increasing nonwage income, such as remittances and conditioned transfer programmes,” ECLAC said. “However, poverty rates continue higher than in the early 1980s, with over 35 per cent of the population—190 million people—living under the poverty line.”

The report pointed out, however, that the volatility that has characterised financial markets since mid last year, and growing international uncertainty will have a negative impact on world growth and economies in the region will not be the exception.

ECLAC said it does not expect the region to suffer the effects as deeply as in the past, given their greater economic strength, based on greater fiscal solvency, with fiscal income rising above spending; a significant reduction in public debt and better debt conditions; and significant positive balance in current accounts.

At the same time, it said, the region faces certain risks in the future. Chief among them is rising inflation rates, which in 2007 reversed its fall since 2002, and reached 6.5 per cent (up from five per cent in 2006).

“This reflects the rising food and oil prices in international markets since the second semester of last year. Increasing inflation has led central banks to mark up interest rates, which may make regional GDP contract,” ECLAC said.

“Secondly, a deepening deceleration of the US economy will affect especially Central America and Mexico, whose exports, particularly manufactured exports, are concentrated in that market. The economic situation in the US could also impact the labour market, causing remittances from immigrant workers to their home countries to drop.

“Lastly, the deceleration of developed economies could lower demand for primary goods and lead to a fall in their international prices, although ECLAC believes they will remain high with regard to 2003 prices, mainly in South America,” it added.

ECLAC added that although these risks would have a moderate impact in 2008, economic deceleration will likely continue for some time, with which growth rates for Latin America and the Caribbean could reach approximately four per cent in 2009.


Source: Trinidad Guardian Newspapers
http://www.guardian.co.tt/business2.html