ECLAC Warns of New Lost Decade in Latin America

A uncertain international scenario with a combination of factors including economic slowdown, inflation, financial volatility and lower capital flowhas slowed growth in Latin America and the Caribbean in 2022 and will further deepen that downward trend in 2023, paving the way for a new lost decade, the Economic Commission for Latin America and the Caribbean said on Thursday.

In his new report “Preliminary Overview of the Economies of Latin America and the Caribbean”, ECLAC said that the region will grow 3.7% in 2022, almost half of the 6.7% registered in 2021; and only 1.3% next year.

If the prospects for next year materialize, it would be the second lost decade since the 50s, with meager regional growth of 0.9% since 2014. In the so-called “debt crisis decade” in the 1980s, the economy advanced 2%. That was so far the lowest performance since 1951.

“Here it is not about whether we are going to have a second lost decade. We are ending the second lost decade, expressed José Manuel Salazar-Xirinachs, Executive Secretary of ECLAC. “The question is if we are going to have a third, what will happen between now and 2030”.

The report was presented at a hybrid press conference that was held at the organization’s headquarters in Santiago, Chile, and was broadcast on the institution’s website and by videoconference.

As the region seemed to recover from the effects of the coronavirus pandemic, it had to deal with the impact of the Russian invasion of Ukraine and then the tightening of international financial conditions. The effects of this unfavorable international context began to be reflected, especially from the third quarter of 2022.

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In 2020, in the midst of the paralysis caused by COVID-19, economic growth in Latin America fell to record levels, below -6%but a year later it recovered to 7%, as the restrictions of the pandemic were eased.

ECLAC estimates are similar to those of the IMF, which forecast growth of around 3.4% for this year and 1.7% for 2023.

“This is an extraordinary moment that requires extraordinary decisions” for countries to emerge from the “numbness” of growth, Salazar-Xirinachs said when presenting the report. “It’s very, very bad, but if you don’t do your homework, things could be even worse,” he warned.

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