MercoPress. South Atlantic News Agency

Latin America forecasted to contract 0.3% this year and 0.7% growth in 2016

Growth projections indicate that economies with a growing level of trade integration with China, will register the biggest deceleration.

The United Nations Economic Commission for Latin America and the Caribbean, ECLAC, forecasted a downward trend in the region’s economic activity for 2015 to -0.3% from 0.5%, and estimates that for 2016 growth will be close to 0.7%.

 Among the main factors behind the growth drop are a weak domestic demand; a global environment marked by a low growth of the developed world; an important deceleration in emerging economies, especially China; the strengthening of the dollar and a growing volatility in financial markets; and an important fall in primary goods prices, ECLAC said.

Despite the regional trend towards a deceleration, the region’s economies will show differentiated dynamics. Growth projections indicate that South American economies -specialized in the production of primary goods, especially oil and minerals- and with a growing level of trade integration with China, will register the biggest deceleration. Those economies are expected to experience contractions of about -1.3% in 2015 and of -0.1 in 2016.

Meanwhile, those economies with greater ties with the United States economy will be able to sustain their rhythm of growth: Mexico and Central America will grow 2.6% in 2015 and 2.9% in 2016, while the Caribbean economies could grow around 1.6% in 2015 and 1.8% in 2016.

In order to face the economic activity deceleration it is imperative to revert the drop of the investment rate and the lower contribution of the gross capital formation affecting growth since it not only impacts the economic cycle but also the capacity and quality of medium- and long-term growth, ECLAC warned.

Energizing investments is a fundamental task to change the current deceleration phase as well as to achieve a path of sustained and sustainable growth in the long term, the organization concluded.