After six years of strong performance, Latin American and Caribbean economies will slow considerably next year as the global economic meltdown takes its toll on the region and unemployment rises, according to the United Nations.
UN’s agency for economic development said Friday that the gross domestic product (GDP) of the 33 Latin American and Caribbean countries will grow a projected 1.9 percent in 2009, a marked drop from the 4.6 percent rate a year earlier, according to preliminary figures from the UN Economic Commission for Latin America and the Caribbean (ECLAC).
According to the UN, unemployment will increase to between 7.8 to 8.1 percent next year, hitting low-income households and those headed by women the hardest and pushing many workers into the informal economy. “However, inflation will slow to 6 percent next year, from 8.5 percent a year earlier,”
“Today the region is better prepared than in previous occasions to handle a crisis, but in no case is it immune,” ECLAC said in a press release.
The UN commission said developed and developing countries must coordinate macroeconomic steps and bolster intraregional trade and integration to manage the crisis, according to the UN commission. It also recommends that international agencies sufficiently finance counter-cyclical measures and that regional financial bodies inject liquidity into the global financial system.
“Between 2003 and 2008, the region enjoyed healthy economic growth as employment expanded and poverty shrank, and most countries posted external and fiscal account surpluses,” the UN said. “But the international economic slowdown is already undoing those gains.”
Citing the UN commission report, the UN said foreign direct investment (FDI) will contract next year. “Mexico and some Central American nations are already seeing exports slide. The drop in prices for fuel, metals, food and other basic goods will hinder trade prospects for the region, while the expected fall in tourism and remittances from migrant workers – both significant sources of revenue – will inhibit growth.”
The commission blamed scarce credit and the rising cost of external financing for causing a strong depreciation in local currencies in several countries, hence “upsetting their balance sheets and thwarting efforts to slow inflation rates further.”