UN Report Says Short-Term Economic Outlook For Latin America and the Caribbean Remains Stable

BRIDGETOWN, Barbados - The economic outlook in Latin America and the Caribbean (LAC) is expected to strengthen, supported by more robust household spending and easing monetary policies.

pasttoHowever, according to the United Nations World Economic Situation and Prospects (WESP) 2025 report, the region faces major downside risks, including domestic political uncertainties and weaker-than anticipated external demand.

The report notes that in the Caribbean, excluding Guyana, economic growth is estimated at 2.5 percent for 2024 and is expected to remain unchanged in 2025 as the effects of the post-pandemic rebound in tourism fade.

It said that although gross domestic product (GDP) growth is significantly above the 0.5 percent average recorded between 2010 and 2019, it remains insufficient to improve living conditions.

In the Dominican Republic, Guyana, and Paraguay, GDP growth is projected to remain above 3.5 percent in 2025.

The UN flagship economic report projects that global growth will remain at 2.8 percent in 2025, unchanged from 2024. It said while the world economy has demonstrated resilience, withstanding a series of mutually reinforcing shocks, growth remains below the pre-pandemic average of 3.2 percent, constrained by weak investment, sluggish productivity growth, and high debt levels.

The report notes that lower inflation and ongoing monetary easing in many economies could provide a modest boost to global economic activity in 2025.

However, uncertainty still looms large, with risks stemming from geopolitical conflicts, rising trade tensions and elevated borrowing costs in many parts of the world. These challenges are particularly acute for low income and vulnerable countries, where sub-par and fragile growth threatens to further undermine progress towards the Sustainable Development Goals (SDGs).

“Countries cannot ignore these perils. In our interconnected economy, shocks on one side of the world push up prices on the other. Every country is affected and must be part of the solution, building on progress made,” said UN Secretary General, António Guterres, in the foreword to the report.

“We’ve set a path. Now it’s time to deliver. Together, let’s make 2025 the year we put the world on track for a prosperous, sustainable future for all.”

The report notes that the short-term outlook for Latin America and the Caribbean remains moderately favourable with regional GDP growth expected to accelerate from an estimated 1.9 percent in 2024 to 2.5 percent in 2025.

It said economic growth is being driven by improvements in private consumption, easing monetary policies, resilient capital flows, and stronger export growth.

However, there are significant downside risks to this outlook. On the external front, a sharper than-expected slowdown in China and the United States would negatively impact exports, remittances, and capital flows.

On the domestic front, political uncertainties could dampen business confidence and investments. Climate-related shocks, particularly in the Caribbean, could also strain fiscal policies and disrupt agricultural production, driving up food inflation.

Although the outlook is resilient, economic growth has remained sluggish for over a decade. Between 2015 and 2024, regional GDP growth averaged just 0.9 percent—the lowest rate for any decade since the 1950s. Thus, per capita GDP remains stagnant, stuck at the same level as ten years ago. In order to improve labour market outcomes, raise living standards, and advance the SDGs, it is crucial to accelerate economic growth.

The report notes that a vital opportunity for accelerating sustainable development is the potential of critical minerals for the energy transition, such as lithium, cobalt, and rare earth elements, and also for accelerating progress towards the SDGs in many countries.

“For resource-rich developing countries, including several in Latin America and the Caribbean, rising global demand for critical minerals presents a unique opportunity to boost growth, create jobs, and increase public revenues for investment in sustainable development.”

However, the report warns that these opportunities come with significant risks. Poor governance, unsafe labour practices, environmental degradation, and over-reliance on volatile commodity markets could exacerbate inequalities and harm ecosystems, undermining long-term development gains.

“Critical minerals have immense potential to accelerate sustainable development, but only if managed responsibly,” said Li Junhua, United Nations Under-Secretary-General for Economic and Social Affairs.

“Governments must adopt forward-looking policies and comprehensive regulatory frameworks to drive sustainable extraction, equitable benefit-sharing, and investments in building productive capacities to maximize the development gains from these resources.”

The labour market situation in developing countries remains challenging, with significant variations in the outlook driven by differing economic conditions and policy responses.

In Latin America and the Caribbean, weak employment growth has been largely confined to the informal sector, with the report noting that youth unemployment rates remain persistently high in Latin America, North Africa, South Asia, and Western Asia.