The organization said this morning in its semiannual outlook report for the region that the seven largest Latin American economies -Brazil, Mexico, Colombia, Argentina, Chile, Peru, Costa Rica- will grow on average 1.4% this year and 2.4% in 2025, a slowdown after the 1.9% registered in 2023.
Except for Argentina, the largest economies in Latin America will have modest growth this year and next as external demand remains weak, the Organization for Economic Co-operation and Development (OECD) said on Thursday.
The organization, headquartered in Paris, said this morning in its semiannual report on prospects for the region that the seven largest Latin American economies -Brazil, Mexico, Colombia, Argentina, Chile, Peru, Costa Rica- will grow by an average of 1.4% this year and 2.4% in 2025, a slowdown after the 1.9% registered in 2023.
"In 2025, the outlook for the region has a more positive tone, associated with greater external demand growth and lower inflation within the range targets of central banks," the OECD said in the report.
But economic risks remain skewed downward, as "global geopolitical tensions and volatility in global financial markets could have a negative impact on the region," the report warned.
Climate disasters could also affect activity, impacting agricultural production in a key region for grain supplies and altering the prices of raw materials that are exported, the OECD indicated.
In the breakdown of projections, Costa Rica leads growth with an expected expansion of 3.6% for this year, while Peru and Chile will grow each by 2.3% in 2024, with prospects of an additional rebound next year thanks to monetary policy relaxation and the expected recovery in wages, which will increase consumption.
Among the most important economies, the agency expects slowdowns in Brazil, to 1.9% from the 2.9% expansion last year, and in Mexico, to 2.2% in 2024 from 3.2% in 2023.
In Brazil, the region's largest economy, the OECD believes that household spending will be the key driver of growth, encouraged by a robust labor market. A similar scenario applies to Mexico, where the strength of employment will sustain domestic demand.
The outlook for Colombia also offers some optimism, with a partial rebound in investment projected as financial conditions improve, although inflation remains high despite its downward trajectory.
The report draws attention to the situation in Argentina, where it expects the economy to contract by 3.3% this year due to the impact of hyperinflation and the severe fiscal adjustment that it considers "necessary", but hamper consumption. The OECD estimates a GDP recovery of 2.7% by 2025.
"The announced fiscal consolidation should continue," said the report on the Argentine economy. "Together with the end of monetary financing and the strengthening of the central bank's balance sheet, such consolidation will restore macroeconomic stability," the report added.
GLOBAL PERSPECTIVE
Regarding the most relevant economies on the planet, the OECD expects GDP growth in the United States to be 2.6% in 2024, and to subsequently slow down to 1.8% in 2025, as the economy adapts to high borrowing costs and the moderate domestic demand growth.
In the euro area, where growth stagnated in the fourth quarter of 2023, the recovery in real household incomes, tight labor markets and reductions in official interest rates will help generate a gradual rebound. GDP is expected to grow by 0.7% in 2024 and 1.5% in 2025.
In Japan, growth should recover gradually, with domestic demand supported by higher real wage growth, continued accommodative monetary policy, and temporary tax cuts. GDP is expected to grow 0.5% in 2024 and 1.1% in 2025.
For its part, a moderate slowdown is expected in China, with GDP growth of 4.9% in 2024 and 4.5% in 2025, as the economy is supported by fiscal stimulus measures and exports.
"The global economy has shown its resilience, inflation has declined to levels close to central banks' targets, and risks to the outlook are leveling out. We expect global growth to remain stable through 2024 and 2025, and it will likely be below the long-term historical average," said OECD Secretary-General Mathias Cormann .
