Hard-won social gains at risk in Latin America and the Caribbean: World Bank

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Augusto de la Torre

Developing countries should prepare for further downside risks, as Euro Area debt problems and weakening growth in several big emerging economies are dimming global growth prospects, says the World Bank in the newly-released Global Economic Prospects (GEP) 2012.

Latin America and the Caribbean (LAC), in particular,are expected to grow 3.6 percent in 2012, and 4.2 in 2013. Weaker global growth, uncertainty arising from the Euro Area debt crisis, slower growth in China, and a policy-induced deceleration in domestic demand are weighing on growth prospects.

According to World Bank Chief Economist for Latin America and the Caribbean, it is still unclear how much the current Euro-zone debt crisis will impact the region.

He said if Chinese growth remains strong and global liquidity and commodity prices remain relatively high, the region should continue to enjoy solid, if somewhat slower growth.

De la Torre said that sustaining and raising long-term growth will require continued emphasis on investment and productivity enhancing policies. And he warned that in a catastrophic scenario where elevated risk aversion shuts down credit and stalls capital inflows to emerging markets, China becomes unable to fully offset a decline in its exports, and commodity prices drop, Latin America and the Caribbean would need to activate all available shock absorbers to protect its hard-won social gains .

Between 2003 and 2010, 73 million people escaped poverty in Latin America and the Caribbean as a result of economic growth and social policies.

Duration: 1’30″

Filed under Caribbean News.
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