Latin America and the Caribbean economies are experiencing a period of low growth and sluggish productivity, with per capita GDP remaining stagnant for 36 quarters. The region's economic slowdown is attributed to weakened domestic demand and a less supportive external sector, with net exports failing to contribute positively to GDP growth. While some countries, particularly in Mexico and Central America, have shown resilience in the services sector, manufacturing has declined, reflecting broader economic stagnation. Employment growth has been modest, with the labor participation rate still below pre-pandemic levels. Inflation has continued to recede, driven by falling international food and energy prices, but remains above pre-pandemic levels. Fiscal balances are projected to stabilize but remain substantial deficits, while public debt levels, although declining as a percentage of GDP, still pose vulnerabilities. The region is expected to remain on a low-growth path in 2025, with limited scope for macroeconomic policy to boost growth, emphasizing the need for reforms to strengthen tax collection, improve fiscal expenditure effectiveness, and implement productive development policies.
