June 18, 2013
World Bank lowers LatAm growth forecast to 3%
Economic growth in Latin America will be lower than previously estimated due to the continuing worldwide slowdown, the World Bank said in a report on Wednesday.
It forecast growth at 3 percent this year, below its previous projection of 3.5 to 4 percent.
For 2013, growth for Latin America was forecast at 3.8 to 4 percent, according to a semiannual report from the World Bank's chief economist for Latin America and the Caribbean. The report's findings were in line with forecasts from the United Nations on Tuesday.
Declining growth in powerhouse China poses the greatest immediate risk to the region now that the euro zone is less likely to break apart, Augusto de la Torre, the chief economist, said.
Booming from a growth in commodities, Latin America is still largely dependent on exports and vulnerable to a decline in global demand, especially from key trade partner China.
"One of the most important aspects is China's situation," de la Torre said.
He said the longer-term effect of China on Latin America depends on what forces drive China's economy, with growth expected to fall below 8 percent for 2012, the lowest level since 1999.
Some economists believe China's decline is cyclical, a result of lower global demand for its goods, especially from Europe, while its monetary policy remains tight ahead of the political transition within the Communist Party.
Others believe China may be seeing a structural shift, in which the booming export-led growth of past decades transitions to more modest gains based on domestic growth.
De la Torre said a prolonged slowdown in China could have a more dramatic effect on export-reliant South American economies, such as Brazil and Argentina.