MercoPress. South Atlantic News Agency

Latam/Caribbean region forecasted to expand 3.5% propped by domestic demand

Paraguay and Panama are the two countries which will most expand says ECLAC

Latin American and Caribbean countries will grow on average 3.5% this year supported by a strong domestic demand and the improved performance of Argentina and Brazil compared with 2012, according to the latest “Updated economic review of Latin America and the Caribbean 2012’ from the UN Economic Commission for Latinamerica and the Caribbean, ECLAC.

The 2013 results are partly due to the expectations of higher growth in Argentina (3.5%) and Brazil (3.0%) boosted by an upturn in agricultural activity and investment, compared to 2012.

Regional expansion is also backed by domestic demand in the wake of improved labour indicators and rising bank credit to the private sector. This combined with sustained high prices for commodities which are expected to remain elevated despite falling from 2012 peaks.

Paraguay will lead growth in 2013, with an expected rise in GDP of 10%, followed by Panama (8.0%), Peru (6.0%) and Haiti (6.0%). The Pluri-national State of Bolivia, Chile and Nicaragua will expand 5%, Colombia 4.5% and Uruguay 3.8%.

Mexico, with expected growth of 3.5% in 2013 and the Central American economies, plus Cuba, Haiti and the Dominican Republic (3.8%) are expected to benefit from a strong US demand combined with improvements in agriculture and construction.

South American countries which tend to concentrate in the production and export of raw materials will grow on average by 3.5% in 2013 boosted by continued growth in Asian economies.

Regarding 2012, according to ECLAC the region’s GDP expanded 3% as a result of subdued growth in the world economy (recession in Europe and poor performance of China and the US).

South America grew 2.5% whereas Central American countries, Cuba, Haiti and the Dominican Republic expanded 4.3% and 4.2%.

Again domestic demand was one of the main drivers of regional growth over the past year, and it was based on good labour indicator performance, increased credit to families and - in the case of Central America and the Caribbean - higher migrant remittances.

Trade, construction and financial services were the fastest growing sectors, while gross national disposable income grew at almost the same rate as GDP, with external regional saving also rising. In addition, inflation fell to a regional average of 5.6% in 2012, compared with the 6.8% posted in 2011.

ECLAC adds that urban unemployment rate dipped slightly last year from 6.7% to 6.4%. Unemployment reached a new 20-year low, with the absolute jobless figures falling by 400,000. However, there are still around 15 million people looking for work in the region's urban areas.

Slower growth in the world economy affected Latin American and Caribbean trade, as the region's export values rose by just 1.6% in 2012, compared with 23.9% in 2011. Meanwhile, import values also fell from 22.3% in 2011 to 4.3% in 2012.