Latin America, Caribbean economies to remain steady this year before slight slowdown
While Latin America and the Caribbean continue to navigate shifting winds and a changing and uncertain global economic environment, the region is projected to maintain steady growth this year before seeing a slight slow down in 2026, the International Monetary Fund said Friday.
Growth for the region is projected to remain relatively stable at 2.4% this year, before falling slightly to 2.3% next year, the Fund said as it released its growth projections at the conclusion of this week’s annual meeting in Washington, D.C.
“Despite the uncertainty, global conditions have been broadly supportive for the region,” Rodrigo Valdés, the director of the Western Hemisphere department at the fund, said during a press conference. “Commodity prices, for example, have stabilized after a period of volatility in the first part of the year. Financial conditions have eased … important regional exports have kept pace with global trends of revenue sharing.”
Valdés noted that the region has not experienced any major disruptions so far this year and labor markets remain robust, generally supporting private consumption in most economies. Those economies, he said, have been aided by the Trump administration’s lower tariffs in the region, in comparison to other harder-hit areas of the world.
While U.S;. tarifffs have had some impact on countries such as Brazil and Mexico, in the Caribbean the effect “has been limited so far, as a large portion of its exports to the United States is exempt from tariffs,” the fund said.
The report notes that the global slowdown to come, as well as the headwinds from tariff-related uncertainty in countries like Brazil and Mexico, are having an impact. Meanwhile, the stability came in terms of strong exports in copper and manufacturing in countries like Chile and Mexico, strong agricultural output in Argentina, Brazil, Colombia and Uruguay and a pickup in money sent from abroad to Central America nations and the Dominican Republic.
“Remittances have been behaving very well in Central America,” Valdés said. “In Mexico, we have seen more sluggish or even dropping remittances.”
He warned, however, in many cases they are not seeing a persistent flow of remittances and instead “there’s a lot of money being sent as one-offs.”
“The labor market in the U.S. is not conducive right now to a lot of hiring of new people, especially immigrants, and therefore that is another source to expect less remittances,” Valdés added.
The report shows that even where a country is doing well in one area, it doesn’t always lead to increased growth. Venezuela, for example, is producing about 1 million barrels of oil a day. However, its growth is forecast to decelerate to 0.5% this year amid mounting macroeconomic challenges and political uncertainty.
“Venezuela remains in a deep economic, political and humanitarian crisis, which has led to about 8 million people,” about 25% of the population, leaving the country since 2014, the fund report said.
Overall, low productivity continues to weigh on Latin America’s growth, according to the fund, which noted that weak productivity performance remains a major constraint.
In the Caribbean, most economies are projected to grow 1.9 percent this year and next.
The growth is being fueled by tourism expansion, increased construction activity and a rebound from last year’s storm-related slowdown, the fund said, noting the region’s strong post-pandemic recovery.
The exceptions in the region are Guyana, whose ongoing drilling for oil continues to fuel “exceptionally strong growth,” and Haiti. Ramped up oil production gave Guyana one of the world’s highest economic growth rates, 43.6%, last year. But gang violence in Haiti is driving a consecutive seventh year of negative growth, the fund said. Guyana’s growth is projected to be at 10.3% and 23% this year and next, while Haiti’s economy is projected to contract by 3.1% this year and 1.2% the next.
The fund also noted that changes in U.S. policies are adding to Haiti’s deepening economic and humanitarian crises. This includes the upcoming Feb. 3 expiration of Temporary Protected Status for up to more than a half million Haitians in the U.S., the Sept. 30 termination of the HOPE/HELP preferential trade access for textiles and apparel, and the one percent remittance tax passed by Congress.
“On the inflation front, unexpected price increases in key trading partners, commodity price increases (for example, food or oil), exchange rate movements, or supply-chain disruptions linked to geopolitical tensions could lead to higher inflation,” the fund said.
Inflation in the Caribbean is expected to rise moderately to 6.9% this year before easing next year. The rise is being driven by higher import prices and the pass-through effect of U.S. currency depreciation in countries with currencies pegged to the dollar.
The fund warned that due to Caribbean economies’ geographic isolation and heavy dependence on imported goods, changes in trade policies such as elevated shipping and imported costs can trigger an increase in inflation and “erode the region’s'’ tourism competitiveness, primarily by disrupting supply chains.
“Global policy uncertainties also underscore the need for stronger policy buffers,” the fund said. “Although several Caribbean countries have made notable progress in reducing debt-to-GDP ratios since the pandemic, public debt levels remain elevated, constraining the authorities’ ability to respond effectively to external shocks,” the fund said.
