WASHINGTON (CMC) — Latin America and the Caribbean’s economic growth might recover modestly to 2.2 per cent in 2015, up from 1.3 per cent last year, its lowest rate since last decade’s global financial crisis, President of the Inter-American Development Bank (IDB) Luis Alberto Moreno has said.
Moreno said that despite the slowdown, the region has managed to maintain its gains against poverty.
In his year-end report to the Board of Executive Directors, which represents the IDB’s 48 member countries, Moreno noted that in a scenario marked by sluggish global growth, falling commodity prices and limited fiscal manoeuvring room, Latin American and Caribbean countries must prioritize reforms that will ensure sustained and inclusive growth over the medium and long term.
“Now, more than ever, the answer lies in internal sources of growth, which brings us up against a huge challenge: increasing productivity. This factor explains why the region continues to trail behind other regions of the world,” he said.
Moreno listed a series of reforms and investments the region needs to undertake, ranging from strengthening trade integration to upgrading its infrastructure and public services.
Other bottlenecks to productivity are the high proportion of informal jobs in its labour markets, the limited access to financial services, the poor quality of education, and the low levels of innovation in its productive activities.
Moreno said that safeguarding social gains achieved over the past few years will also be critical. Poverty has dropped to historically low levels — 27.6 per cent in 2014.
“We cannot turn back,” he emphasized.
To that end, countries will have to closely monitor their labour markets and social welfare programmes, in order to protect the most disadvantaged among their population. They will also need to reduce the risks posed by natural disasters, which disproportionately harm the poor.
Moreno said the IDB has much to contribute to the pursuit of this reform agenda, as it remains one of the region’s leading sources of long-term financing and technical assistance.
In 2014, it approved more than US$13 billion allocated to projects involving institutional development (43 per cent), infrastructure and the environment (38 per cent), social sectors (16 per cent), and trade and regional integration (four per cent).
Moreno also highlighted the IDB’s increasing support for private sector-led projects, which received about US$2.8 billion in loans and guarantees in 2014, up from US$2.1 billion the previous year.
He added that the IDB has made progress in the preparation of a proposal to merge all of its private sector activities in order to gain operational efficiencies.
The proposal is due to be presented to the IDB’s Board of Governors at their next Annual Meeting, scheduled to take place in March in Korea.