World Bank trims Latin America growth estimate for 2026

The World Bank revised its economic growth forecast for Latin America and the Caribbean downward for 2026 in its latest Global Economic Prospects report published on January 10, 2025, citing persistent structural challenges and a weaker-than-expected global environment as primary reasons for the adjustment. The institution now projects the region's GDP to expand by 1.8% in 2026, a reduction from its previous estimate of 2.2% made six months earlier. This revision reflects a more cautious outlook for the medium term, even as the bank maintained its 2025 growth forecast for the region at a modest 2.0%. The downgrade places Latin America's projected growth rate for 2026 below the global average and significantly behind the anticipated expansion in other emerging markets and developing economies. The report highlights that the region continues to grapple with low investment rates, sluggish productivity growth, and high levels of public debt, which constrain fiscal space for growth-enhancing policies. Furthermore, external headwinds, including subdued demand from major trading partners like China and the United States, coupled with volatile commodity prices, are expected to continue weighing on the export-dependent economies of South America. Within the region, the outlook is uneven. Economies in Central America are generally expected to perform slightly better due to stronger ties with the resilient U.S. economy and robust remittance flows. In contrast, larger South American nations, particularly commodity exporters like Brazil, Argentina, and Chile, face greater uncertainty. The World Bank emphasized that accelerating growth will require ambitious reforms to improve education and infrastructure, strengthen institutional frameworks, and foster a more competitive business climate to attract private investment. The report serves as a sobering reminder that without significant policy shifts, the region risks another decade of mediocre economic performance, failing to close the prosperity gap with more advanced economies.