Argentina has upgraded its economic growth outlook for 2022 from 3.6% in April to the 4.5% currently forecast, according to the World Bank. These data represent an increase in growth of 0.9% and place the country governed by Alberto Fernández among those that will grow the most this year.
The list of countries with the best economic prospects also includes Panama, which tops the ranking with 6.5% growth, followed by Colombia with 5.4% and the Dominican Republic with economic growth of 5%.
According to the World Bank, these good data will not remain only in Argentina, as the institution calculates that the Gross Domestic Product (GDP) of the Latin American and Caribbean regions will increase by 2.5% this year, which is 0.2% more than estimated months ago. As for next year, 2023, the World Bank forecasts that growth will slow to 1.9%, but will accelerate again in 2024 to 2.4% growth.
Despite the good data for the region, its growth prospects remain lower than those of other emerging markets worldwide, which stands at an average of 3.4% thanks to the power of China and India, two countries in which growth is expected to be significantly higher than the rest.
According to a statement released by the World Bank on Tuesday on the situation in Latin America, "the regional slowdown reflects the tightening of financial conditions, weakening external demand growth, rapid inflation and high political uncertainty in some countries". The institution forecasts that GDP per capita in the region will barely grow by 0.6% between 2019 and 2023.
According to the official document issued by the World Bank, the increase in inflation in Argentina is due to a combination of external and internal factors. The prices of the most basic foodstuffs and fuels have risen rapidly due to the tension caused by the Ukrainian invasion on the international markets. In response to this situation, the authorities took the decision to raise interest rates in order to control inflation. "Fiscal and monetary policies are expected to be broadly tilted against growth in the near term, as monetary authorities tighten policy to combat inflation and the withdrawal of pandemic-related fiscal support continues," the Bank's report states.
The Russian attack on Ukraine has limited the supply of grain and fertilisers, which means a reduction in supply and consequently a rise in global prices. However, this presents an opportunity for some Latin American grain producing countries to position themselves as global exporters. "Prices for the region's main exports are expected to be substantially higher in 2022, but growth gains will be held back by a sluggish production response for some commodities and rising input costs, including energy and fertilisers," the World Bank report says.
For the war-torn countries, the World Bank says the conflict will cause a 45.1% contraction of the Ukrainian economy and a sharp increase in national poverty, affecting as much as 20% of the population.However, its economy could grow by more than 2% in 2023 and up to almost 6% in 2024.
For its part, the Russian economy will contract by almost 9% this year and by only 2% in 2023. The growth outlook for the country headed by Vladimir Putin will not be positive until 2024, when the economy will recover timidly by 2.2%, according to the World Bank.
To this situation must be added the COVID-19 outbreaks that have forced the temporary closure of production plants and hampered maritime trade with the Asian giant, causing bottlenecks in global supply.
In the rest of the world, growth is expected to be 2.9%, driven by India and China, two expanding economies that are pulling all the others. As the World Bank points out, despite the negative impact on global activity in 2022, "essentially no rebound is projected next year: global growth is forecast to rise only slightly by 3% in 2023, as many headwinds-in particular, high commodity prices and continued monetary tightening-are expected to persist," it adds: "In addition, the outlook is subject to a number of downside risks, including intensifying geopolitical tensions, rising stagflationary headwinds, increased financial instability, continued supply-side tensions and worsening food insecurity."
Americas Coordinator: José Antonio Sierra.