Latin America's economic growth is set to come in lower than expected this year, as US protectionism and widespread wariness of emerging markets put a drag on the region, a UN panel said Thursday.
The Economic Commission for Latin America and the Caribbean (ECLAC, or CEPAL in Spanish) slashed its forecast for the region by 0.7 point to 1.5 percent, saying the "complex global scenario" had dimmed the outlook since its last report in April.
It has been a tough year for emerging markets across the board, with global trade tensions taking their toll and the strong US dollar battering many currencies and bonds – notably in Argentina and Turkey, which have faced full-blown currency crises.
ECLAC cited a laundry list of problems slowing Latin America's economies: "trade disputes between the United States, China and other nations; growing geopolitical risks; a decline in capital flows toward emerging markets in the last few months and a rise in sovereign risk levels; depreciations of local currencies against the dollar; and a global economic expansion that is tending to lose momentum."
Ironically, the region's fundamentals remain relatively solid.
ECLAC predicted the region-wide primary deficit would fall to 0.5 percent of GDP this year, and that average inflation would remain within the expected range at 6.5 percent to June – excluding regional basket-case Venezuela. Gross domestic product growth of 1.5 percent would still be slightly better than the 1.2 percent the region registered last year.
The outlook is uneven across the region, said the head of the United Nations panel, Alicia Barcena, presenting its report in Mexico City.
"Mexico and Central America are doing better than South America in 2018," she said.
Brazil, the region's largest economy, will grow 1.6 percent this year, up from one percent last year, ECLAC forecast. Mexico, the second-largest, will grow 2.2 percent, up from 2 percent last year. Argentina is meanwhile facing a contraction of 0.3 percent, down from 2.9-percent growth last year.
Oil giant Venezuela, which is plunged in a political and economic crisis, is facing a contraction of 12 percent, slightly better than the 13 percent it shrank last year, the panel said.