Low growth expected to continue in Latin America in 2026

by · UPI

Dec. 19 (UPI) -- The Economic Commission for Latin America and the Caribbean said the region will remain on a low growth path in 2026 and warned that the main drivers of economic activity in recent years, private consumption and external demand, are expected to lose momentum.

According to the agency's latest projections, regional gross domestic product would grow 2.4% in 2025 and 2.3% in 2026. If confirmed, Latin America and the Caribbean would post four consecutive years of weak growth, with an average annual expansion of just 2.3%.

In a recent report, the United Nations regional commission, known by its Spanish acronym, ECLAC, said private consumption is expected to weaken in 2026. In recent years, consumption accounted for more than half of regional GDP growth, but its contribution is projected to decline amid softer external demand and slower job growth.

The report points to divergent trends across subregions. In South America, ECLAC forecasts growth of 2.9% in 2025, driven by recoveries in Argentina, Bolivia and Ecuador after contractions in 2024. In 2026, growth is expected to slow to 2.4% as most South American economies lose momentum.

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Central America is projected to expand 2.6% in 2025, weighed down by weaker demand from the United States. Growth is expected to improve to 3.0% in 2026, though vulnerabilities linked to trade, remittances, access to financing and exposure to climate change persist.

In the Caribbean, growth would reach 5.5% in 2025 and 8.2% in 2026, mainly due to the expansion of oil activity in Guyana, alongside a normalization of tourism and stronger construction activity. Still, the report noted that high exposure to natural disasters continues to constrain the region's growth potential.

ECLAC also expects job growth to slow, with employment rising 2% in 2024, 1.5% in 2025 and 1.3% in 2026.

On prices, regional inflation is projected to reach a median of 3% in 2026, up from an estimated 2.4% at the end of 2025. The level would remain below the peaks seen during the 2021-22 inflation shocks and broadly in line with central bank targets across the region.

The commission warned that the outlook for 2026 will depend on multiple external and internal risks. External factors include global GDP growth, particularly among the region's main trading partners, and trends in global trade.

Other risks include the stance of U.S. monetary policy, potential shifts in U.S. economic and trade policy, uncertainty in international financial markets, and volatility in external financing flows, including foreign direct investment and remittances.