ECLAC Indicates That The Region Has Registered Four Straight Years Of Low Growth And Will Face Less Dynamic Private Consumption And External Demand In 2026

The report points to differences in economic activity trajectories at a subregional level, with South America seen growing by 2.9 percent in 2025, driven by recoveries in Argentina, Bolivia and Ecuador after their economies contracted in 2024. In 2026, the South American expansion is forecast to decelerate to 2.4 percent, due to lower growth in the majority of its economies.

Meanwhile, Central America is expected to register a 2.6 percent expansion in 2025, affected by weaker demand from the United States. In 2026, growth is seen improving to 3.0 percent, although vulnerabilities remain in relation to trade, remittances, access to financing and exposure to climate change.

The Caribbean is expected to grow by 5.5 percent in 2025 and 8.2 percent in 2026, underpinned by significant growth in oil activity in Guyana, and aided by the normalisation of tourism and an improved performance in the construction sector. However, this subregion is highly exposed to natural disasters, which constrains its economies' capacity for growth.

ECLAC's Preliminary Overview 2025 estimates that employment growth will also lose momentum, slowing from 2.0 percent in 2024 to 1.5 percent in 2025 and 1.3 percent in 2026. In terms of prices, median regional inflation is seen reaching 3.0 percent in 2026, above the 2.4 percent estimated for the end of 2025 but below the levels seen during the inflationary shocks of 2021-2022, and around the values targeted by central banks in the region.

Latent risks

The report warns that the scenario in 2026 will be subject to multiple external and internal risks.

With regard to external risks, the region's growth will be contingent upon the dynamics seen in GDP growth globally, especially among its main trading partners, and in global trade. Another influential factor will be the United States' monetary policy stance, which has been more expansionary, and possible changes to that country's economic and trade policy. In addition, regional growth in 2026 may be affected by uncertainty in international financial markets and possible volatility in external financing flows, including Foreign Direct Investment and remittances.

On the domestic front, GDP growth may be affected by the performance of labor markets and its impact on household income and, therefore, consumption, due to the structural vulnerability of many of the region's economies to natural disasters and due to the pressures arising from the hefty resources earmarked for debt service. In addition, the speed with which the inflation rate declines, and monetary policy is eased, will be decisive for the evolution of consumption and investment.

Towards higher, more sustained and resilient growth

Given this outlook, ECLAC stresses the urgency of strengthening and expanding macroeconomic policy space. In a global environment transformed by economic fragmentation, climate change, demographic shifts and a fast-paced technological revolution, countries need policy frameworks that are capable of reducing vulnerabilities while simultaneously mobilising resources for a productive transformation.

The institution's executive secretary, José Manuel Salazar-Xirinachs, contended that to escape the trap of low capacity for growth, the region needs more ambitious productive development policies – even more so today under new conditions of geoeconomic rivalry – combined with macroeconomic policies that would mobilise more resources for growth, innovation, economic diversification, productive transformation and the creation of quality jobs.

Only in this way will the region be able to bolster its resilience and move towards more productive, inclusive and sustainable development.

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