Preparing the Macroeconomic Terrain for Renewed Growth

Produced by: 
Inter-American Development Bank
Available from: 
March 2023
Paper author(s): 
Arturo Galindo
Victoria Nuguer
Macroeconomics - Economic growth - Monetary Policy

Latin America and the Caribbean needs to address a triple challenge—three complex, interconnected macroeconomic issues—to achieve its population’s aspirations for development and welfare. First, the region faces a social challenge. With nearly 18% of the population living on less than US$3.1 per day, poverty levels exceed those of a decade ago. While some correction has taken place, the pandemic increased poverty overall, and recently, Russia’s war in Ukraine has made it even more difficult to reclaim lost gains. In addition to poverty, inequality is also on the rise. Second, the region faces a fiscal challenge. The COVID pandemic stressed fiscal resources and expenditures. As a result, after the crisis, sovereign debt reached over 70% of GDP, and while fiscal consolidation is still possible, many risks remain. Third, the region faces a growth challenge. Productivity growth and, consequently, long-term economic growth is currently estimated at only around 2%—too low to meet the development goals of most countries in the region. In addition to these specific issues, the region also faces the cross-cutting challenges of dealing with climate change, advancing diversity, inclusion, and equity, and strengthening the institutional context and the rule of law for a better business environment.


Research section: 
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