Regional Economic Outlook for the Western Hemisphere Department, October 2025
Regional Economic Outlook, October 2025
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- Regional Economic Outlook for the Western Hemisphere Department, October 2025
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- Published: October 17, 2025
Regional overview
- Growth in the region was steady and disinflation slow, but rising public debt and weak medium-term growth pose challenges.
- Growth in Latin America and the Caribbean is expected to remain steady in 2025 and moderate slightly next year.
- The disinflation process continues, though convergence toward targets will likely take longer than previously envisaged in a few countries.
- The continued increase in public debt underscores the need for fiscal consolidation.
- Solid policy frameworks—underpinned by central bank independence and rules-based fiscal policy—are essential to support price stability and monetary policy effectiveness.
- Addressing low productivity through targeted structural reforms is essential for enhancing business dynamism and boosting growth.
Chapter 1 — Navigating a Shifting Global Environment
- The global economy is facing major policy shifts and persistent shocks amid unusually high uncertainty.
- Growth in Latin America and the Caribbean is expected to remain steady in 2025 and moderate slightly next year, affected by differing exposures to trade, remittances, commodities, and global capital markets.
- The disinflation process continues, but convergence to targets will likely take longer than previously envisaged in a few countries.
- The sustained increase in public debt underscores the need for fiscal consolidation, which would in turn support monetary policy implementation.
- Solid policy frameworks, underpinned by central bank independence and rules-based fiscal policy, are essential.
- Amid lackluster long-term growth prospects, structural reforms remain crucial to boost productivity, improve the business environment, and harness opportunities for further trade integration, including within the region.
Chapter 2 — Fostering Growth through Business Dynamism
- Low productivity has weighed on Latin America’s growth over the past decades, in part attributable to persistent resource misallocation and sluggish productivity growth among firms.
- These constraints limit the region’s ability to foster growth.
- Reforms should target core frictions, including size-based regulations, financial constraints, and limited market competition.
- Successful reform efforts in other regions offer valuable guidance to reinvigorate productivity and enhance business dynamism.
Chapter 3 — Preserving Hard-Won Monetary Policy Gains amid Persistent Fiscal Risks
- By the early 2000s, countries in Latin America and the Caribbean had achieved price stability supported by sweeping reforms that enhanced central bank independence and strengthened monetary policy frameworks.
- These advances helped anchor inflation expectations and enabled effective monetary transmission.
- Fiscal frameworks and policies raise challenges, particularly associated with high debt levels and interest costs, which can amplify the fiscal impact of monetary policy and hinder monetary policy transmission.
- Evidence in this chapter shows that low public debt and appropriate fiscal stances aid monetary policy in achieving inflation targets.
- There is scope to further improve monetary policy frameworks.
- To safeguard price stability, countries in the region must focus on advancing fiscal consolidation, improving fiscal policy frameworks, and continuing reforms to further strengthen central bank independence.
Source: Regional Economic Outlook for the Western Hemisphere Department, October 2025
Content in this bundle
- Chapter 1
- Chapter 1 Online Annex
- Chapter 2
- Chapter 2 Online Annex
- Chapter 3
- Chapter 3 Online Annex
- Full Report
- Western Hemisphere Regional Economic Outlook; Board Presentation; October 2024
