While highlighting that most of the countries in the Latin America and Caribbean region are being adversely affected by the steep rises in energy prices, the Economic Commission for Latin America and the Caribbean (ECLAC) has identified that Guyana is among the few countries in the region benefitting from increased energy costs.
The information was contained in the ECLAC’s annual report – Economic Survey of Latin America and the Caribbean 2022: Trends and challenges of investing for a sustainable and inclusive recovery. The Economic Survey of Latin America and the Caribbean is issued annually by the Economic Development Division of ECLAC.
“…the rise in energy prices is detrimental to hydrocarbon importers, particularly countries in the Caribbean (except Guyana and Trinidad and Tobago) and Central America, whose the terms of trade of commodities will deteriorate. In South America, the effect is mixed, as some countries are oil producers, so they are expected to benefit from the higher price, but they also import refined products, which are currently more expensive,” the report said.
The report highlighted that the rise in commodity prices has benefited countries in the region that export commodities, particularly hydrocarbons and food. It added that, on average, the region is expected to see a 7% drop in the terms of trade for commodities. It further stated that performance is expected to vary from one sub-region to another and countries that are net exporters of hydrocarbons will benefit most from an increase in the terms of trade for commodities of around 17%.
The document emphasizes that Latin American and Caribbean countries are facing a complex economic outlook in 2022 and in the coming years. Lower economic growth is compounded by strong inflationary pressures, little dynamism in job creation, declining investment and growing social demands. This situation has translated into major challenges for macroeconomic policy, which must strike a balance between policies that would drive the economic reactivation and policies aimed at controlling inflation and ensuring the sustainability of public finances.
In addition to the region’s complex domestic scenario, there is an international scenario in which the war between the Russian Federation and Ukraine has caused growing geopolitical tensions, less vigorous global economic growth, reduced availability of food, and higher energy prices that have increased the inflationary pressures already in play due to the supply shocks prompted by the coronavirus disease (COVID-19) pandemic, the report indicates.
ECLAC forecasts that South America will grow 2.6% (in comparison with 6.9% in 2021); the group made up of Central America and Mexico will expand 2.5% (in comparison with 5.7% in 2021); and the Caribbean – the only sub-region that will grow more than in 2021 – will experience a 4.7% expansion in 2022, without including Guyana (in comparison with 4.0% a year earlier).
Inflation, meanwhile, has continued to rise, reaching a regional average of 8.4% as of June 2022, which is equivalent to more than double the average value recorded in the 2005-2019 period. At a sub-regional level, as of June 2022, the economies of South America had the highest level of inflation on average (8.8%), followed by the economies in the group composed of Central America and Mexico (7.5%) and those in the English-speaking Caribbean (7.3%). This has prompted central banks to raise their monetary policy rates and reduce monetary aggregates.
In addition, the deceleration in economic activity is constraining the labour market recovery, especially for women. While the male unemployment rate went from 10.4% at the end of the second quarter of 2020 to 6.9% at the end of the first quarter of 2022, marking a 3.5 percentage point drop, the female unemployment rate fell by 2.1 percentage points in the same period, going from 12.1% to 10.0%. Furthermore, at the end of the first quarter of 2022, the rate of women’s labour force participation (51.4%) showed a greater lag than the men’s participation rate (74.2%). This lag in women’s reincorporation into the labour market is conditioned by the sluggish recovery of economic sectors in which female employment is concentrated and by the increased need for care that emerged sharply once the pandemic began.
The report highlighted government revenues, which reached historically high levels in 2021, are expected to decline relative to GDP. It added that in the Caribbean, the projected trend for public revenue and spending should lead to a stable balance, with an overall deficit of 3.6% of GDP in 2022.
