The post-pandemic growth that was seen in latter part of 2021 in Latin America and the Caribbean is being eroded to a large extent by the Russia-Ukraine conflict according to the United Nations Economic Commission for Latin America and the Caribbean.
In ECLAC’s Economic Survey of Latin America and the Caribbean, the regional macroeconomic report and outlook for 2022 revealed, “The countries of Latin America and the Caribbean face a complex economic and social environment in 2022. Weak economic growth is accompanied by strong inflationary pressures, slow job creation, falling investment and growing social demands.”
The report said, the complex domestic situation in the region is compounded by an international landscape in which the war between the Russian Federation and Ukraine has heightened geopolitical tensions, dampened economic growth, reduced food availability and driven up energy prices, adding to existing inflationary pressure caused by supply shocks from the coronavirus disease (COVID-19) pandemic.
The report noted the region’s external demand is expected to fall in 2022.
It was pointed out that prior to the war in Ukraine, economic activity was already slowing and global GDP was forecast to grow by around 4.4% in 2022, down from the 6.1% recorded in 2021.
However as a result of the war, world GDP is expected to expand by 3.1%. In the United States, growth of 1.7% is expected, well below the 4% forecast before the conflict.
The report noted that while the conflict in Ukraine has intensified the pattern of rises in commodity prices seen since the second half of 2020, pushing some products to record levels this has largely hurt several countries in the region.
The report stated, “Although the rises in commodity prices have benefited countries in the region that export commodities —particularly hydrocarbons and food— on average the region is expected to see a 7% drop in the terms of trade for commodities.”
It noted that with the exception of Trinidad and Tobago and Guyana, the Caribbean largely suffered due to the rise of hydrocarbon prices.
“The rise in energy prices is detrimental to hydrocarbon importers, particularly countries in the Caribbean (except Guyana and Trinidad and Tobago) and Central America, whose terms of trade of commodities will deteriorate. In South America, the effect is mixed, as some countries are oil producers, so they are expected to benefit from the higher price, but they also import refined products, which are currently more expensive,” the report said.
