SANTIAGO – The economy of Latin America and the Caribbean will shrink by 0.3 percent this year, the UN Economic Commission for Latin America and the Caribbean, or ECLAC, said on Monday, revising downward an earlier forecast that called for growth of 0.5 percent.
Major factors contributing to the contraction include weak domestic demand, a substantial slowdown in emerging economies, especially China, the strengthening of the dollar and increased volatility in financial markets, Santiago-based ECLAC said.
Despite the negative regional trend, the outlook varies widely among countries.
“Growth projections indicate that South American economies – specialized in the production of commodities, especially oil and minerals, and with a growing degree of trade integration with China – will register the biggest deceleration,” ECLAC said.
The South American sub-region is expected to contract roughly 1.3 percent this year and 0.1 percent in 2016, with downturns of 6.7 percent in Venezuela and 2.8 percent in Brazil.
At the opposite end of the spectrum, the ECLAC report calls for growth of 5.8 percent in Panama and 5.6 percent in the Dominican Republic.
Countries whose economies are linked most tightly to the U.S., such as Mexico and the nations of Central America and the Caribbean, are expected to enjoy continued modest growth.
ECLAC predicts the regional economy will expand 0.7 percent in 2016.