Economic Survey of Latin America and the Caribbean 2014

Challenges to Sustainable Growth in a new External Context

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The Economic Survey of Latin America and the Caribbean 2014 looks at how economic growth in the region has been slowing since 2011, and the data available for the first six months of 2014 indicate that the region will not match the growth rate of 2.5% recorded in 2013. Growth has been muted over the first few months of the year, owing to stagnant gross fixed capital formation and faltering private consumption. Government consumption, on the other hand, has picked up, and the net contribution of exports has been more positive than during the same period of the previous year. A regional growth rate of 2.2% is forecast for 2014.

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Short- and medium-term consequences of the new external context and growth-oriented macroeconomic policy options

The Latin America and Caribbean region’s external economic environment and the policy responses adopted by the countries have been key determinants of the region’s performance. The most recent evidence of this was the pronounced 1.6% contraction of regional GDP in 2009 as a result of the global financial crisis. The diverse consequences of external shocks and countries’ differing response capacities depend on multiple factors such as the intensity of the relationship with the world economy through trade and financial channels, export specialization and composition of imports, and strengths and weaknesses in relation to debt, the sustainability of public and private finance, levels of international reserves, access to external liquidity and the characteristics of the financial system. This chapter examines the repercussions of the external scenario forecast for the medium term (discussed in chapter I) on growth in the short and medium term for different groups of countries in the region in the light of their respective strengths and vulnerabilities. On the basis of these specific features, the chapter discusses guidelines for the macroeconomic policies of the different groups of countries.

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