ECLAC sees slow growth persisting in LatAm/Caribbean region
Latin America and the Caribbean’s gross domestic product will grow 2.4% in 2025 and 2.3% in 2026, according to the United Nations’ Economic Commission for Latin America and the Caribbean.
If these forecasts are borne out, the LAC region will accumulate four consecutive years of low growth, with average annual growth of only 2.3%, the commission reported in its “Preliminary Overview of Economies of Latin America and the Caribbean 2025,” published this month.
The commission indicated that the region continues along a path of low growth, forecasting that the main sources that have sustained economic activity in recent years will lose momentum in 2026. Consumption has been the main driver of economic activity, accounting for more than half of the growth in regional GDP, but this contribution will decrease in 2025 and 2026 as a result of less dynamic external demand and lower employment growth, it said.
The report points to differences in economic activity trajectories at the subregional level. The Caribbean, which includes Puerto Rico, is expected to grow 5.5% in 2025 and 8.2% in 2026, supported by significant growth in oil activity in Guyana, the normalization of tourism and improved performance in the construction sector. However, the subregion is highly exposed to natural disasters, which constrains its capacity for growth, the commission noted.
South America’s economy will grow 2.9% in 2025, driven by recoveries in Argentina, Bolivia and Ecuador after their economies contracted in 2024, but that expansion is expected to decelerate to 2.4% next year, the commission said.
Central America is projected to expand 2.6% in 2025, affected by weaker demand from the U.S., and improve to 3% in 2026, although vulnerabilities remain related to trade, remittances, access to financing and exposure to climate change, the commission reported.
Employment growth will lose momentum, slowing from 2% in 2024 to 1.5% in 2025 and 1.3% in 2026. Median regional inflation is expected to reach 3% in 2026, above the 2.4% estimated for the end of 2025 but below levels seen during the inflationary shocks of 2021-2022 and around targets set by central banks in the region, the commission said.
The report warned that 2026’s outlook will be subject to multiple external and internal risks, including dynamics in global GDP growth and trade, as well as U.S. monetary policy, which has been more expansionary, and possible changes to the country’s economic and trade policy. Uncertainty in international financial markets and possible volatility in external financing flows will also affect 2026 regional growth, the commission said.
Given this outlook, the commission stressed the urgency of strengthening and expanding macroeconomic policy space.
“In a global environment transformed by economic fragmentation, climate change, demographic shifts and a fast-paced technological revolution, countries need policy frameworks that are capable of reducing vulnerabilities while simultaneously mobilizing resources for a productive transformation,” the commission said.
In October, the World Bank updated its forecast for the region, increasing it to 2.5% in 2026 from June’s forecast of 2.4%. Its forecast for this year was unchanged at 2.3%.
Uncertainty about global trade policies, fueled by U.S. tariffs, has weighed on investment across the board, the World Bank reported, noting that familiar barriers such as weak infrastructure, a bias in favor of established companies and poor education at all levels are inhibiting entrepreneurship and how large companies can grow.
Regarding the LAC region, the Organisation for Economic Co-operation and Development pointed to challenges such as lower spending — only 0.5 % of GDP on average — on productive development policies, versus 3% in OECD countries.
Tax expenditures absorb significant resources, averaging 4% of GDP in the region and 0.9% for corporate income tax incentives, restricting governments’ ability to support economic development, the OECD reported in its Latin American Economic Outlook 2025: Promoting and Financing Production Transformation.
More than 55% of workers are employed informally, with only 2.1% working in medium- or high-technology sectors, well below the OECD average of 7.7%. Limited skills development and weak innovation systems make it harder for the region to transition to higher value-added activities, the OECD added.
