In 2018, significant growth is expected in global economies, particularly emerging ones.
The acceleration in developing countries, which resumed in 2017, will continue in the new year, reaching growth of 4.8%, as we can see in the graph below.
Selected regions and countries: gross domestic product growth, 2016-2018
Source: Economic Commission for Latin America and the Caribbean (ECLAC).
The explanatory factors for the expansion of the economies of Latin American and Caribbean countries in 2018 are the increase in exports and the value of common goods prices.
In 2017 we observed a 13% increase in the prices of common goods, and it is expected that they will remain that way in 2018. If this happens, prices will be more favorable than in previous years.
Furthermore, Latin America and the Caribbean will continue to benefit from low international interest rates, reduced financial volatility and reduced risk perceptions. All of this represents a significant advantage in the growth of these countries’ economies.
Although growth rates still remain below the levels reached before the great financial crisis, as the world economy develops, global trade volumes also strengthen.
Latin America and the Caribbean (selected countries and country groupings): variation in the terms of trade, 2015-2017
Source: Economic Commission for Latin America and the Caribbean (ECLAC).
The Trade Balance will change positively due to the strengthening of exports. In this sense, regardless of whether imports increased by 4% in 2017, in Latin America, this value was fully offset by exports, which grew by around 11%, due to the increase in the prices of common goods, and the recovery not only of economic activity, but also trade at both a global and intra-regional level. All countries in the region will see their exports increase. The most visible increase will be that of Brazil, which will increase its exports by around 17%.
Latin America (selected countries and groupings): projected variation in goods exports, by volume and price, 2017
Source: Economic Commission for Latin America and the Caribbean (ECLAC).
After two years of economic slowdown, the economies of South American countries will grow by around 0.8%. In the Latin American economies as a whole, for Cuba, the Dominican Republic and Haiti, a growth rate of 3.3% is expected this year.
With regard to English- and Dutch-speaking countries in the Caribbean, they indicate average growth rates of 0.1% in 2017, a fact that reflects the damage caused by hurricanes Irma and Maria in some countries in the region.
Even though there is general economic growth in the region’s countries, the unemployment rate will increase from 8.9% in 2016 to 9.4% in 2018. It is in urban areas that this figure worsens most. This factor is explained by the simultaneous decrease in job offers and an increase in the number of people looking for work (participation rate).
Given that salaried employment is characterized by higher levels of quality than other categories of employment, the average quality of employment has deteriorated further in the region.
Urban participation, employment and unemployment rates, rolling years
Source: Economic Commission for Latin America and the Caribbean (ECLAC).
It is also expected that in 2018 international interest rates will remain low. This will create an excellent opportunity for Latin American and Caribbean countries to increase their economic policy space in order to sustain the expansionary phase of economic growth.
Economic activity is clearly expanding. Therefore, the prospects are for positive GDP growth in the region, which began in 2017 and will continue in 2018.
Latin America: GDP growth rates and contribution by expenditure components to growth, first quarter of 2013-third quarter of 2017
Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.
It is estimated that in 2018, the GDP rate of Latin America and the Caribbean will increase by 2.2%, which is a substantially high increase compared to 2017 (1.3%). Furthermore, economic activity is expected to strengthen in a group of Latin American and Caribbean countries, including Chile (2.8%), Colombia (2.6%) and Peru (3.5%). Panama will be the Latin American country with the highest growth rate (5.5%), followed by the Dominican Republic (5.1%) and Nicaragua (5.0%).
With the exception of Cuba (1.0%), Ecuador (1.3%) and Venezuela (-5.5%), all Latin American economies will expand between 2% and 4% in 2018.