Plummeting economies in Venezuela and Brazil are expected to drag Latin America into negative growth again this year, the UN’s Economic Commission for Latin America and the Caribbean reported late Tuesday.
The commission projected a 0.8% slide in the region’s overall gross domestic product for 2016, a bit worse than last year’s 0.5% dip, AP reported.
It said global growth remains slow, with low prices for Latin American commodities and financial uncertainty fed in part by the United Kingdom’s vote on June 23 to leave the European Union.
The worst performers are expected to include troubled Venezuela, with an 8% contraction, and Brazil, down 3.5%. The commission forecast a decline of 2.5% for Ecuador and Trinidad and Tobago and a 1.5% dip in Argentina.
It said, South American economies overall will likely shrink by 2.1% due to reduced internal and global demand for their products and deteriorating terms of trade: costlier imports and cheaper exports.
Low petroleum prices have hit especially hard in Venezuela, which has failed to diversify its economy away from near total dependence on oil exports.
Low fuel prices, however, are helping Central America, which is expected to see 3.8% growth, partly due to growing internal demand and increased remittances from abroad.
The Caribbean is projected to experience a 0.3% slip.
Top Performers
The region’s performers are expected to be the Dominican Republic with 6% growth and Panama, rising by 5.9%. Nicaragua and Bolivia are forecast to grow by 4.5% and Costa Rica by 4.3%. All were at the top of last year’s growth statistics as well. Mexico is projected to grow by 2.3% and Colombia by 2.7%.
The overall slide across the region is likely to mean greater urban unemployment, which could rise to 8.1% this year from 7.4% in 2015.
The commission’s executive secretary, Alicia Barcena, said that to accelerate economic growth, countries need to adopt policies that support investment and increase productivity. The commission also urged steps to reduce tax evasion.
Venezuela is getting some financial relief as it burns through foreign reserves to pay for imports of badly needed food and medicine.
The Latin American Reserve Fund said late Monday that it approved a three-year-loan of $482 million for Venezuela’s central bank.
The loan represents about 5% of the central bank’s reserves, which have plunged to a 13-year low as a collapse in oil prices forces the government to scramble for hard currency amid widespread shortages of basic goods.
