OECD Forecasts Moderate Growth for Latin America's Top Economies, Except Argentina

The Organisation for Economic Co-operation and Development (OECD) has released its latest economic outlook for Latin America, projecting moderate growth for the region's highest-income countries in 2024 and 2025. However, Argentina is anticipated to be an exception due to its ongoing struggle with hyperinflation and the need for severe fiscal adjustments.

According to the OECD report, the seven main Latin American economies - Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico, and Peru - are forecast to grow by an average of 1.4% in 2023 and 2.4% in 2024. "External demand will remain weak, but the outlook for the region has a more positive tone for 2025 with greater growth in external demand and lower inflation," the report states.

While most of the region's economies are expected to experience moderate growth, Argentina stands out as a notable exception. The OECD predicts that Argentina will contract by 3.3% in 2023 due to hyperinflation and the implementation of severe fiscal adjustments. However, the organization expects Argentina's growth rate to rebound to 2.7% by 2025.

Why this matters: The OECD's economic outlook for Latin America highlights the varying growth trajectories of the region's major economies and the challenges faced by Argentina in particular. The report's findings have implications for investors, policymakers, and businesses operating in the region.

The OECD report also identifies potential risks that could impact the region's growth outlook, including weak external demand, global geopolitical tensions, and volatility in financial markets. Additionally, the organization cautions that climate disasters could negatively affect agricultural production and push up prices of raw materials.

Among the seven main Latin American economies, Costa Rica, Chile, and Peru are expected to have the fastest growth rates in 2023. Meanwhile, Brazil and Mexico, the region's largest economies, are forecast to grow at 1.9% and 2.2%, respectively.

The OECD's economic outlook for Latin America's highest-income countries in 2024-2025 presents a mixed picture, with moderate growth expected for most economies but Argentina facing significant challenges. As the report notes, "The outlook for the region has a more positive tone for 2025 with greater growth in external demand and lower inflation." However, the organization also emphasizes the need to monitor potential risks that could impact the region's growth prospects.

Key Takeaways

• OECD projects moderate growth for Latin America in 2024-2025, except Argentina.
• Argentina expected to contract 3.3% in 2023 due to hyperinflation and fiscal adjustments.
• Costa Rica, Chile, and Peru forecast to have fastest growth in 2023 among major economies.
• Brazil and Mexico, the region's largest economies, projected to grow at 1.9% and 2.2% respectively.
• OECD cites risks like weak external demand, geopolitical tensions, and climate disasters for the region.