The World Bank sees a slower year for the Colombian economy, as well as for the region, in light of new 2024 projections.
In the report, it predicts that Latin America's GDP will expand 1.6% in 2024. While economic growth of 2.7% and 2.6% is expected for 2025 and 2026.
According to the analysis, there is a warning, because these are the lowest rates compared to all other regions of the world “and insufficient to boost prosperity.”
Colombia, low growth
At the beginning of the year, the World Bank expected Colombia to grow 1.8% in 2024, now (in this April update) it believes it will be 1.3%; However, he sees a rebound in the economy in 2025 at a rate of 3.2% and 3.1% in 2026.
It is striking that this is the second consecutive time that the bank has reduced Colombia's outlook. The figure is one of the lowest in the region. Among the Latin American countries that will improve their GDP in 2024. Based on the reports, Ecuador is the economy with the lowest growth in the area with 0.7%, followed by Colombia with the figure of 1.3%, followed by Bolivia with 1.4% and Brazil 1.7%.
William Maloney, chief economist for Latin America and the Caribbean at the World Bank Group, said that “in the case of Colombia, 1.3% this year, and it rises to more than 3% later, but this 2024 is slow, although we are waiting good numbers of recoveries the next two periods.”
Regarding the effect of the reforms of the Government of the president, Gustavo Petro, and to the question of whether this will affect growth, the analyst responded that “We do not have anything with the reform processes, but I want to repeat that the country must concentrate on FDI, we see good ports in the Atlantic and the Pacific to have part of the nearshoring opportunities.”
They highlighted better levels in education and that little by little progress is being made in cutting interest rates to reactivate consumption.
Those who fall in the region
Among all the economies of Latin America and the Caribbean there are only two countries that will not grow. The strongest case is that of Argentina, the GDP is expected to contract 2.8%, as they see that there is an economic and political transition that President Javier Milei is leading, and it is still too early to return to growth rates .
Still, not everything is bad news for Argentines. If the government of the libertarian Milei meets its objectives, then the rebound would come. The World Bank believes that the country would grow 5% in 2025 (the best in the region if Guyana is excluded with its expected 16.8%).
Along with the case of Argentina, among those that will not grow this year, Haiti appears, the Central American country will fall 1.8% according to the outlook, very similar to -1.9% in 2023. Still, a slow recovery is also expected, with the economy rebounding by 1.9% in 2025 and another 2% in 2026.
The entity draws attention in its analysis because many households are under pressure because social transfers are decreasing and salaries have not yet recovered to pre-pandemic levels.
“The low level of growth, in a sustained manner, is not only an economic statistic but a barrier to development. It translates into reduced public services, fewer employment opportunities, depressed wages and greater poverty and inequality. When economies stagnate, the potential of their people is limited. We must act decisively to help Latin America and the Caribbean break this cycle,” said Carlos Felipe Jaramillo, World Bank vice president for Latin America.
The reason for the low level
The report bases its theory, why Latin America and the Caribbean are not growing at a better pace, on factors behind these figures that include low levels of investment and domestic consumption, high interest rates and high fiscal deficits, falling commodity prices and uncertainty in the prospects of important partners such as the United States, China, Europe and other G7 countries.
“An adverse global scenario, marked by geopolitical tensions, disruptions in transportation through the Suez Canal and the El Niño phenomenon, could further harm regional prospects,” they said.
Regarding other contrary points, the good management of inflation has been a positive point in the region, reflecting decades of solid macroeconomic reforms. Regional inflation, excluding Argentina and Venezuela, stands at 3.5%, compared to 5.7% in OECD countries (Organization for Economic Cooperation and Development).
In most countries in the bloc, inflation expectations remain anchored and central banks are expected to meet their targets in 2024. To capitalize on this progress and revive economies, the region must address long-standing challenges. Reforms in infrastructure, education and trade are essential to improve productivity and integration into the world.
“As the impact of the pandemic recedes, the region's growth rates return to the levels of the 2010s. This shows that the region has not addressed the persistent problems that block its potential, including low levels of education, poor infrastructure and high investment costs, which also fuel social unrest” Maloney added, amid his call for an agenda that drives regional growth.
The entity recognized that there are better regional expectations with interest rates unlike other areas.
Guyana's oil boom will lead to the best regional growth
The petrodollars that go to four years of high volumes in Guyana will lead that country to be the one with the best economic performance not only in all of Latin America but in the world. It is the only country on the planet that is experiencing an unprecedented injection of billions from the oil discoveries and jobs of Americans like Chevron and Exxon.
That is why the World Bank sees that at the end of 2024, the country will advance 34.3%, even better than the 33% in 2023; Furthermore, in 2025 they see a rebound of 16.8%.
