Tuesday 6 December 2022

The Latin American countries whose economies are best prepared to face 2022

Looking ahead to next year, the projections of international organizations give us a slightly more "realistic" picture of how different countries are evolving.

Looking ahead to next year, the projections of international organizations give us a slightly more "realistic" picture of how different countries are evolving.

Q REPORTS (BBC Mundo) This year Latin America had to experience the “rebound effect.”

As 2020 was so tough for the world’s economies due to the effects of the covid-19 pandemic, the growth rates this year about to end are misleading.

Looking ahead to next year, the projections of international organizations give us a slightly more “realistic” picture of how different countries are evolving.

The reason is that since the current Gross Domestic Product (GDP) is measured in relation to the previous year, it seems at first glance that Latin America took a spectacular leap.

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But the truth is that it is a “rebound effect” because the basis of comparison is very low.

So, looking towards next year, the projections of international organizations give us a slightly more “realistic” picture of how different countries are evolving.

The most widely used thermometer to assess the economic health of a country is GDP, however, there are many others.

For now, we are going to take a look at the prospects for economic growth, inflation, and risk rating for the Latin American economy.

Economic growth

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If it is exclusively about economic growth, the economies with the best prospects for next year are Panama, the Dominican Republic, El Salvador and Peru, according to the latest forecasts from the Economic Commission for Latin America (ECLAC).

Prospects, however, may vary depending on “uneven progress in vaccination processes and the ability of countries to reverse the structural problems behind the low growth trajectory they exhibited before the pandemic,” says the agency in its “Economic Study of Latin America and the Caribbean” published in October.

Growth projection of Gross Domestic Product (GDP) 2022

Prospects, however, may vary depending on “uneven progress in vaccination processes and the ability of countries to reverse the structural problems behind the low growth trajectory they exhibited before the pandemic,” the agency says in its “Economic Study of Latin America and the Caribbean” published in October.

“Well positioned”

Among the largest economies, there are some such as Chile and Colombia that are “reasonably well positioned to recover in 2022, even amid the anxiety over the omicron variant,” Benjamin Gedan, deputy director of the Latin America Program at the center of Wilson Center studios, based in Washington.

Compared to other countries in the region, Chile would be in good shape, says the researcher, because most of its population is fully vaccinated and more than half of Chileans have received a booster.

The Central Bank of the South American country projects growth of close to 2% for next year, although the economy could expand faster amid growing demand for its copper and lithium production, Gedan said.

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However, doubts remain about how the country will evolve during the term of the president-elect, Gabriel Boric, and what will happen with the plebiscite on a new Constitution in the second half of next year. Colombia, on the other hand, is also in a position pretty good for 2022, adds the researcher, “despite the nervousness about his presidential elections” and the memories of a 2021 with social unrest.

Among the smaller countries, Panama is leading the growth projection list for next year made by ECLAC.

“He seems to be recovering very well,” says Gedan.

With the recovery of world trade, the Panamanian economy should see a strong boost, while President Laurentino Cortizo’s ambitious infrastructure program may also contribute to expansion.

All in all, omicron could affect Panama’s important tourism industry, something that remains to be seen.

The wave of inflation

One of the headaches in the world and in Latin America is the escalation of inflation this year.

Although growth is recovering step by step in the region, the cost of living is also rising and many people complain that their salary is not enough to buy enough products.

Most governments have tried to counteract the inflationary wave by raising interest rates, an issue that also affects consumers because credit becomes more expensive.

Rising inflation has been driven, in part, by rising food prices, wrote Maximiliano Appendino, an economist in the Regional Studies Division of the Western Hemisphere Department of the International Monetary Fund (IMF).

There is a lot of uncertainty in the environment in relation to the prices of raw materials, bottlenecks in supply chains and the increase in the costs of maritime transport, in addition to the possibility that new variants will appear that aggravate the covid pandemic -19.

On the other hand, Appendino added, the region needs to balance an uncertain inflation outlook with employment, which “is still substantially below pre-pandemic levels.”

A difficult 2022

“Latin America’s growth prospects for 2022 are bleak,” says Gedan.

Not only because of the economic effects that covid-19 has left, but also because the region encountered the pandemic in a bad state.

Next year comes with “a worrying debt hangover and rising inflation,” argued he researcher.

From the political point of view, cuts in the public budget could unleash new episodes of social unrest, as occurred, for example, in Colombia in April 2021 in response to proposals for economic reforms, argues Gedan. And in that sense, political uncertainty. in the main Latin American economies “it has limited the investment that the region needs to recover.”

This uncertainty is given by the evolution that may follow, for example, the new governments of Pedro Castillo in Peru and Gabriel Boric in Chile, and by the results of the 2022 presidential elections in countries such as Colombia and Brazil.

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