The Latin America and Caribbean economy will grow by 2.1 per cent this year.
That is the prediction of the Inter-American Development Bank (IDB), which called the projection “a gradual slowdown compared to the region’s 2.2 per cent growth in 2025” and said it came at a time of global uncertainty and persistent challenges.
The IDB’s new macroeconomic report, Resilience And Growth Prospects In A Shifting Global Economy, said the region’s economies were generally resilient, but that “accelerating inclusive growth will demand sound macroeconomic frameworks and bold structural reforms, alongside efforts to harness opportunities in technology and commodities, amid growing global risks”.
Laura Alfaro Maykall, IDB chief economist and economic counselor, said: “Latin America and the Caribbean navigated global uncertainty with resilience, supported by fiscal and monetary frameworks that have helped contain inflation and sustain macroeconomic stability.
“Looking ahead, countries have to accelerate productivity-led growth, strengthen public finances, and seize new opportunities from digitalisation, artificial intelligence, and the energy to raise living standards and build more resilient and inclusive economies.”
The mutilateral development bank noted that labour markets in the region “have sustained low unemployment, inflation has been largely contained, and investor confidence has improved, as reflected in historically low borrowing costs, with the median sovereign spread falling to 209 basis points at the end of 2025, down from 268 in 2019”.
However, it added that “despite these gains, growth remains insufficient to close income gaps, public-debt levels are high, and higher interest payments are placing increasing pressure on public finances and external accounts”.
The IDB believed that the region “is uniquely positioned to turn rapid technological advances and global energy needs into engines of growth”.
The report said that labour market conditions improved markedly in 2025, with unemployment rates falling in most countries between June 2024 and June 2025, and joblessness nearing its lowest levels in recent years.
It also stated that while women’s participation in the labour force has surged, growth remains constrained by modest productivity gains and demographic shifts that are slowing the expansion of the working-age population.
This meant that “sustaining growth will increasingly depend on productivity gains and upgrading skills”.
“Expanding access to digital training and supporting workers’ transitions into higher-productivity occupations will be essential as labour markets evolve,” the IDB said.
The report said that the region’s fiscal policy was entering a challenging phase, “requiring urgent strengthening of fundamentals”.
“Public debt remains above pre-2020 benchmarks, interest payments are rising, and fiscal consolidation has weakened,” the IDB reported.
“Average public debt in the region stands at 59 per cent of GDP, with projections ranging between 57 per cent and 66 per cent of GDP by 2028 under baseline and stress scenarios.”
On inflation, the IDB said that while this “has largely returned to target across much of the region, higher global interest rates, shifting expectations, and the growing use of digital and foreign-currency assets are reshaping the monetary-policy landscape”.
The report underscored that policies promoting stronger competition, improved skills formation, deeper regional integration, and the development of more sophisticated regional value chains could significantly boost productivity, and should remain at the centre of Latin America and the Caribbean’s policy agendas. (SC/PR)
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