The Economic Commission for Latin America and the Caribbean (CELAC/ECLAC) has improved its growth forecast for the region by 0.5 points, predicting that GDP will expand by 1.7 percent this year.
However, the UN agency warned that Argentina's economy will contract by three percent in 2023 and that a contraction of 1.5 percent is forecast for the region in 2024.
A better performance by the region's largest economies, Brazil and Mexico, in the first months of the year, explain the improved forecast of this year.
"Many economies were much more resilient than expected, particularly the largest, Brazil and Mexico. Being the largest economies, they weigh more in the weighted average," said Daniel Titelman, director of CELAC's Economic Development division, at a press conference.
In the case of Brazil, "there was a very positive impact due to the increase in harvests, which were very abundant in the first quarter of the year. In the second quarter, growth of 0.2 percent was expected, and the great news came out that it was 0.9 percent," he added.
Mexico "is also performing better than expected and it has to do with the growth of the United States and all the foreign investment that is coming into Mexico," he said.
However, the bulk of Latin American economies will continue to be affected by the low growth of the world economy and global trade, CELAC said.
With regard to inflation, although "a fall" in the dynamics of price increases "is observed, it remains at levels higher than those observed before the pandemic and within the target ranges of central banks."
Inflation in the region closed 2022 at 7.6 percent on average. As of May this year, the indicator had fallen to 5.7 percent.
CELAC also anticipates "a lower dynamism in job creation, along with falls in investment." It also warns of the impact of climate change on Latin American economies.
"The low growth in Latin America and the Caribbean could be aggravated by the negative effects of a worsening of climate shocks, if the (necessary) investments in adaptation and mitigation are not made," said ECLAC executive secretary José Manuel Salazar-Xirinachs.
During 2023, Panama, with an expansion of 5.1 percent, Paraguay, with 4.2 percent, and the Dominican Republic, with 3.7 percent, will lead regional growth in percentage terms.
Brazil will grow by 2.5 percent, while Mexico will expand by 2.9 percent.
Argentina, with a contraction of three percent, and Chile, with a 0.3 percent fall in GDP, were the only countries issued with negative forecasts.