According to estimates released by the Economic Commission for Latin America and the Caribbean (ECLAC) on Tuesday, Mexico’s economy will grow by almost 3% this year. The Commission considerably improved the outlook for the region’s second largest economy, raising it to 2.9% from its estimate of 1.8% in April. While Mexico’s outlook for this year improved, the estimate represents a slowdown, as it grew 3.4% last year.
At the regional level, average Gross Domestic Product (GDP) growth will also be better than anticipated. ECLAC revised its forecast, increasing the estimates to 1.7% from the April figure of 1.2%. Latin American countries “will maintain low levels of growth this year and next, affected by a negative global and very complex regional economic outlook,” the Chile-based institution said in the report.
“The low growth in Latin America and the Caribbean could be aggravated by the negative effects of a worsening of climate shocks, if countries do not make the needed investments to adapt to and mitigate climate change,” ECLAC’s executive secretary, José Manuel Salazar-Xirinachs, said in a statement. This year, droughts across the region have impacted incomes in the food-exporting countries of Argentina and Brazil. They also reduced the water level in the Panama Canal, which has raised the prices of export products.
In 2050, the combined GDP of Latin America’s six largest countries could be between 9% and 12% lower than a growth-trend scenario if investments are not made to compensate for climate shocks, ECLAC warned.
The organization estimates that employment will grow by 1.9% in 2023 and by 1.1% in 2024. “There is concern about the quality of employment in this context of low growth, as it is very likely that workers will become more vulnerable, have lower levels of social protection and be employed in less productive sectors, which will lead to a decrease in average wages and an increase in the region’s levels of poverty and inequality,” ECLAC said.
In its report, ECLAC recommends taking short-term measures to attack the “high level of tax evasion” in the region. “In 2018, tax noncompliance in Latin America amounted to $325 billion, 6.1% of regional GDP. Revising tax expenditures would also offer a significant opportunity to strengthen public revenues. In 2021, tax expenditures in Latin America averaged 3.7% of GDP, representing 19% of central government budget expenditures.”
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