Regional Economic Outlook

The war in Ukraine is shaking the world economy and raising uncertainty about the outlook for Latin America and the Caribbean. Even before the war, the region’s recovery from the pandemic was losing momentum and growth is returning to its pre-pandemic trend rate of around 2.5 percent for 2022. The war brings a further shock to inflation, and policymakers across the region have reacted decisively by tightening monetary policy and implementing measures to soften the blow of higher food and energy prices on the most vulnerable—thus mitigating the risks of social unrest. Rising interest rates complicate the management of already high debt levels, and an escalation of the war could further tighten financial conditions in the region. In this context, an inclusive fiscal consolidation strategy would maintain support for the vulnerable while helping rebuild buffers.