The World Bank’s forecast for growth in Latin America and the Caribbean in 2021 has jumped by more than one-fifth compared to predictions made just four months ago. The revised Latin America growth forecast is the latest indication of the region’s positive economic outlook following the turmoil of the global pandemic.
According to “Recovering Growth” (pdf), the World Bank’s semi-annual report on Latin America and the Caribbean, the organization has upgraded the region’s expected gross domestic product (GDP) growth for the year to 6.3%, having suggested it would be 5.2% in an analysis released in June (pdf.
This will allow the region to almost recover the 6.7% GDP drop that it suffered during 2020 due the COVID-19 pandemic. However, the report suggests that its new Latin America forecast may prove conservative.
“Given the robust recoveries in their principal trading partners, low global borrowing rates, and the prospect of another commodity super cycle, growth rates might be expected to be 1.5 percentage points higher,” states the report, which was released on 6 October.
According to the latest Latin America growth forecast, Chile and Peru are the strongest performers. In 2021, Peru is expected to experience double-digit growth. El Salvador, Panama and Belize are expected to all experience at least 8% GDP.
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Guyana is the country that performs best, with a predicted 21.2% GDP growth this year. However, it is also the only country where the 2021 figure is lower than the previous year. 2020 growth was a stunning 43.5%, and is expected to surpass that figure in 2022.
Every other country surveyed experienced a GDP decline in 2020, with the new predictions highlighting how many of the region’s economies are set to recover.
The World Bank’s revised Latin America growth forecast echoes an upgraded prediction published last month by the UN’s Economic Commission for Latin America and the Caribbean (ECLAC), offering encouraging signs to foreign investors about the potential for the region.
Five of the largest bounce backs for Latin America growth
The World Bank’s new Latin America growth forecast for 2021 highlights how many of the economies from the region are expected to see GDP growth bounce, with nine countries set to witness growth that will exceed declines suffered during the worst period of global health emergency, in 2020.
The most notable recoveries will be those of Argentina and Chile, Panama, Panama, Chile, Panama, and Peru. There will be turnarounds of at minimum 16%. Double-digit turnarounds can be expected in Colombia, El Salvador, Honduras, Mexico, and the Dominican Republic.
The new Latin America growth forecast predicts that Argentina will see a 17.4% turnaround in its GDP. This year, growth is expected to be 7.5% after a decline of 9.9% for 2020.
Notably, even though employment figures aren’t expected to return to prepandemic levels soon, Argentina is poised for one of the most significant recoveries in the region. As the economy bounces, it will.
Belize, a Central American country, is set for a turnaround unlike that of Panama. This year’s GDP growth is 9%. In 2020, Belize experienced a 14% decline.
As the report highlights, Belize has one of the best scores for “resolving insolvency” from the region, as noted in the World Bank’s own Doing Business 2020 report — something that contributes to recovery, offering more opportunity for recovery to firms left stricken by the crisis.
Chile entered the global health crisis in 2019 due to a rare period when there was social unrest. This had caused a restricted growth rate in 2019. In 2020, Chile saw a GDP drop of 5.8% following the outbreak of the pandemic.
However, according to the new Latin America growth forecast, GDP is expected to grow 10.6% in 2021, representing a bounce of 16.4%, with Chile’s well-publicized rapid dispensation of vaccines to its population a significant contributing factor to its recovery success.
Having seen its GDP plummet 17.9% during 2020, Panama’s predicted GDP growth of 9.9% in 2021 will not see it overcome the losses made last year, but will still represent a significant recovery.
The report highlights that Panama is expected to maintain its public debt to GDP ratio of below the regional average in 2021 by implementing measures to boost recovery. This despite it being higher than average prior to the crisis.
According to the World Bank’s new Latin America growth forecast, Peru’s predicted GDP growth of 11.3% in 2021 will see it effectively overcome the 11.1% decline seen in 2020 and represent a turnaround of 22.3% — the third-largest in the region.
These results were achieved despite widespread anxiety about the future economy following the election of Pedro Castillo (leftist president), earlier this year. His economic approach was much more moderate that many analysts expected.
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The new Latin America growth forecast by the World Bank highlights the improved economic outlook for this region. It is a good time to explore new opportunities.
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