CEPAL hopes that by 2025, the economy of the entire Latin American and Caribbean region will improve and is expected to grow by 2.3%. Photo: Real estate billboard in El Salvador. (Source: AFP)

The Economic Commission for Latin America and the Caribbean (CEPAL) said the region's economy remains "stuck" in a low growth trap and will only grow at an average rate of 1.8% this year.

A report presented by CEPAL on August 13 showed that poor employment dynamics and climate change are the reasons for this low forecast.

In addition, poor investment performance and low labor productivity, coupled with limited internal space for implementing macroeconomic recovery policies and global instability also contributed to the worsening of the Latin American and Caribbean economy.

Geopolitical and trade tensions will also hurt the region's growth trajectory, the UN agency warned.

Analyzing by subregion, CEPAL's “Economic Study of Latin America and the Caribbean 2024” estimates that economies in South America will grow by just 1.5% this year, while the Caribbean will grow by 2.6%, and Central America and Mexico by 2.2%.

The committee's experts expect that by 2025, the average economy of the entire region will improve and is expected to grow by 2.3%, mainly thanks to the Gross Domestic Product (GDP) of the South American region.

According to CEPAL, the countries that will grow the most this year are Paraguay at 3.8%, Uruguay at 3.6%, Venezuela at 5%, Costa Rica at 4%, Honduras at 3.8% and the Dominican Republic at 5.2%. Meanwhile, Argentina's GDP will shrink by 3.6% and Haiti's by 3%. The committee maintains its growth forecast for Brazil, the region's largest economy, at 2.3%, and Colombia at 1.3%.

CEPAL Executive Secretary José Manuel Salazar-Xirinachs highlighted the need to strengthen productivity growth policies alongside macroeconomic, labor, adaptation and mitigation policies for climate change to address the low growth trap.

“Strong growth” is the region’s top priority in responding to environmental, social and labour challenges, Mr. Salazar-Xirinachs stressed.

The report points out that Latin American and Caribbean countries have low economic growth rates, averaging 0.9% in the period 2015-2024.

Regarding the impacts of the low-growth trap on employment, experts point to the close relationship between growth and job creation in many aspects. From 2014 to 2023, the average growth in the number of employed people in the region was 1.3%, one-third of the growth recorded in the 1970s (3.9%). Similarly, labor productivity in 2024 is estimated to be lower than the level recorded in 1980.

Employment growth in Latin America and the Caribbean was mainly in informal employment, especially among women, while informal employment was largely concentrated (74.4%) in low-productivity sectors such as construction, trade, transport, tourism and services.

Regarding the impact of climate change on employment, the report presents a scenario in which, without investment in adaptation and mitigation, 43 million jobs could be lost.