Latin America economic outlook

Can Latin America’s economy grow faster?

EIU’s latest whitepaper looks at the impact of the Ukraine war on Latin America’s economy, which countries are set to prosper this year, and which could falter.

Growth in Latin American economies has stagnated since the last commodity “supercycle” in 2014. However, following Russia’s invasion of Ukraine, spiking commodities prices could in theory be the catalyst for faster economic growth rates in the Latin America region.

Illustrated using a regional heatmap, EIU’s analysts have tracked key economic indicators (including consumer price inflation, public debt, and political stability risk among others) to produce an overall score that assesses the Latin American countries’ most vulnerable, and those most resilient, to the ongoing issues caused by the Ukraine crisis.

The report found that:

  • The five countries best placed to take advantage of the current global economic environment this year are Bolivia, Ecuador, Paraguay, Chile, and Peru
  • The commodity price spike that began in 2021 and gained further momentum on the back of the Ukraine crisis will bring some boost to these export-dependent Latin American economies
  • The five countries most vulnerable to the global economic impact of the Ukraine crisis are El Salvador, the Dominican Republic, Nicaragua, Costa Rica, and Panama
  • All the above countries have entered into the crisis with relatively high levels of public debt, substantial external imbalances, and high inflation, and none is a major commodity exporter
  • Even for the big commodity exporters, the outlook is not trouble-free. Spiking inflation is adding to the pain of consumers who were hit hard by the pandemic, and driving pressure for increased government support, at a time when governments are under market pressure to narrow fiscal deficits and get a grip on public debt ratios that spiked amid the pandemic

“The global economy appears to be in a weaker position this year than in the last commodity boom. The reality is that it has taken extreme supply shocks in the form of a pandemic and a war to drive up commodity prices to their current peaks. Clearly, there will be a fiscal and external windfall for many countries in Latin America, which will feed through into greater investment, faster employment growth and more consumption.”

Fiona mackie, regional director for latin America, eiu

Read the full report on the outlook for Latin America amid the Ukraine war to learn more.