(Reuters) -The World Bank on Wednesday cut its 2025 economic growth forecast for Latin America and the Caribbean to 2.1% from its January forecast of 2.5%, saying regional economies must adapt to navigate increasing global uncertainties.
The global lender cited a delay in interest rate cuts in developed economies, concerns around global trade restrictions, slowing growth in China, and cuts in overseas development assistance as reasons for the outlook adjustment.
Forecasts for 2025 growth in the two largest regional economies, Brazil and Mexico, were down from the World Bank’s updates in January. Mexico’s economy is now projected to have no growth this year, compared to the previously forecast 1.5% expansion, while Brazil’s growth outlook was cut to 1.8% from 2.2%.
Argentina, which secured a $20 billion deal with the International Monetary Fund earlier this month, is projected to have economic growth of 5.5% this year, up from a previous forecast of 5.0%.
Earlier this week, the IMF forecast a 0.3% contraction in the Mexican economy this year, warning that the impact of U.S. tariffs and rising trade tensions would further slow global economic growth.
“The global economic landscape has changed dramatically, marked by higher levels of uncertainty,” Carlos Felipe Jaramillo, the World Bank’s vice president for the Latin America and the Caribbean Region, said in a statement during the IMF and World Bank spring meetings in Washington.
“Countries must recalibrate their strategies and advance bold and practical reforms.”
The 2.1% estimated growth for the region this year would make it the slowest-growing region globally, the World Bank said.
Amid the need for investment, government spending continues to be a concern. The World Bank estimates the regional debt-to-output ratio rose to 63.3% last year from 59.4% in 2019.
“Access to technology and exploiting scale economies dictate that trade and FDI (foreign direct investment) remain essential to accelerating growth in Latin America and the Caribbean,” said William Maloney, the World Bank’s chief economist for Latin America and the Caribbean.
Maloney said a longer list of trade destinations and service exports, as well as near-shoring, provide opportunities to the region, which “require increasing both productivity and nimbleness.”
(Reporting by Rodrigo Campos; Editing by Paul Simao)
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