Latin America and the Caribbean Macro Poverty Outlook Country-by-country Analysis and Projections for the Developing World Spring Meetings 2024 © 2024 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclu- sions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. All queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Latin America and the Caribbean Argentina Dominican Republic Nicaragua The Bahamas Ecuador Panama Barbados El Salvador Paraguay Belize Grenada Peru Bolivia Guatemala Saint Lucia Brazil Guyana Saint Vincent and the Grenadines Chile Haiti Suriname Colombia Honduras Uruguay Costa Rica Jamaica Dominica Mexico MPO 1 Apr 24 coupled with measures to strengthen the Central Bank's balance sheet and refine the ARGENTINA Key conditions and monetary policy framework. Bold reforms are needed to remove barriers to growth, challenges including by improving education out- comes and enhancing the business climate. Table 1 2023 Argentina has faced a decline in GDP per These reforms (along with a credible and Population, million 46.5 capita over recent decades, marked by sustainable macroeconomic policy frame- GDP, current US$ billion 624.6 a history of recurrent fiscal deficits and work) are critical for encouraging private GDP per capita, current US$ 13426.9 highly procyclical fiscal policies. These sector investment and job creation. a 0.6 International poverty rate ($2.15) factors have contributed to economic The labor market's apparent resilience in a 2.5 volatility and repeated crises. Macroeco- 2022-2023, with record low unemployment Lower middle-income poverty rate ($3.65) a 10.9 nomic distortions have eroded Argenti- rates of around 6 percent, belies an un- Upper middle-income poverty rate ($6.85) Gini index a 40.7 na's competitiveness and hindered export sustainable increase in public employment School enrollment, primary (% gross) b 110.2 diversification, thereby impeding the and a surge in vulnerable independent b 75.4 country's ability to fully capitalize on its workers. Informal employment continues Life expectancy at birth, years comparative advantages in agroindustry, to be widespread, accounting for nearly 40 Total GHG emissions (mtCO2e) 406.2 as well as in select manufacturing and percent of the labor force. Concurrently, Source: WDI, Macro Poverty Outlook, and official data. service sectors. As a major food producer, real wages have declined by an average of a/ Most recent value (2022), 2017 PPPs. b/ Most recent WDI value (2021). the country has become increasingly sus- 25 percent between 2018 and 2023, result- ceptible to weather-related shocks. ing in income losses for all population seg- The country is now confronting the chal- ments, especially the middle class. Urban lenge of rectifying significant and endur- poverty rose from 10.9 percent in 2022 to ing macroeconomic imbalances while pre- an estimated 12.4 percent in 2023, based on The government faces the challenge of serving social stability. The central bank's the international poverty line of US $6.85 correcting significant macroeconomic monetary financing of persistent fiscal per day (2017 PPP). imbalances while ensuring the protec- deficits over the last decade has resulted tion of the most vulnerable. Priorities in soaring inflation, which reached triple digits in 2023. The implementation of include eliminating the fiscal deficit, multiple price controls has led to price Recent developments realigning prices, and strengthening the misalignments, causing resource misallo- Central Bank's balance sheet. Inflation cation and complicating efforts towards The economy is estimated to have con- surged in December but is now declin- economic stabilization. tracted by 1.6 percent in 2023, largely due ing. Despite the expansion of social pro- To address these macroeconomic imbal- to persistent macroeconomic imbalances, ances and rebuild economic confidence, a severe drought that led to a 26 percent grams, poverty rose to an estimated 12.4 comprehensive reforms are essential. The year-over-year decline in agricultural pro- percent in 2023. The economy is pro- immediate priority is a fiscal consolidation duction, and related export losses amount- jected to shrink by 2.8 percent in 2024, strategy that halts the monetary financing ing to approximately US$20 billion. The with poverty reaching 15.1 percent. of the fiscal deficit while safeguarding the current account deficit expanded to 3.5 poor. Such a strategy would need to be percent of GDP, exacerbating pressures on FIGURE 1 Argentina / Net international reserves and FIGURE 2 Argentina / Actual and projected poverty rates percent difference between official and informal exchange rate and real GDP per capita US$ billion Percent Poverty rate (%) Real GDP per capita (constant LCU) 50 200 18 20000 16 18000 40 160 14 16000 30 120 14000 12 12000 20 80 10 10000 8 8000 10 40 6 6000 4 4000 0 0 2 2000 -10 Net Reserves (lhs) -40 0 0 Informal-formal FX premium (rhs) 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 -20 -80 International poverty rate Lower middle-income pov. rate 2012 2014 2016 2018 2020 2022 2024 Upper middle-income pov. rate Real GDP pc Source: World Bank based on Ministry of Economy. Source: World Bank. Notes: see Table 2. Note: Net Reserves are gross reserves net of short-term foreign currency denominated liabilities. MPO 2 Apr 24 international reserves. The trade balance inflation peaked at 25.5 percent in Decem- likely to result in a 2.1 percent primary fis- turned into a deficit of US$6.9 billion, dri- ber, decreasing to 13.2 percent by Febru- cal surplus for the central government. ven by a 24 percent fall in exports, which ary. Adjustments are still needed for gas As the country tackles macroeconomic exceeded a 10 percent decrease in imports. and electricity prices. Social protection imbalances and rectifies price distortions, Net international reserves were estimated measures included a doubling (in nominal inflation is predicted to decline and eco- to be negative US$8.0 billion at the end terms) of the main social programs (uni- nomic growth to pick up. A stronger of the year. The drought-induced revenue versal family allowance and food support) fiscal stance, consistent trade surplus- shortfall, combined with increased spend- and extraordinary monthly lump-sum es—supported by expected rises in ener- ing and tax cuts prior to the presidential supplements to low-income pensioners. gy and mining exports—and foreign di- elections, widened the Federal Govern- Although social assistance is well-targeted, rect investment (FDI) inflows should con- ment's fiscal deficit to 4.2 percent of GDP. the real value of social benefits, including tribute to a reserve buildup and establish A new administration assumed office on pensions and social transfers, fell by 30 a basis for enduring growth. December 10 2023 and immediately began percent year-over-year by February 2024. However, the economic forecast is marred implementing a stabilization program. It by significant potential downside risks, in- announced an ambitious program aiming cluding societal and legislative opposition for a fiscal consolidation target of 5 per- to the reform agenda and the country’s centage points of GDP for 2024, along with Outlook vulnerability to external shocks, including measures to correct relative price misalign- climate-related events. Social vulnerabili- ments, fortify the Central Bank’s balance Real GDP is projected to shrink by 2.8 ties are emerging from the steep drop in sheet, and deregulate the economy. Key percent in 2024, largely due to the im- real incomes in the context of high infla- initiatives included a one-time devaluation pact of price realignment and reduced tion. The governing party's limited pres- of the official exchange rate by 55 percent, public spending. The brunt of the eco- ence in Congress poses legislative hurdles the introduction of a monthly crawling peg nomic adjustment is expected to be for economic reforms. On the global stage, rate of 2 percent, the removal of import borne by non-agricultural sectors, while an economic deceleration in key trade controls, and strategies to address the sig- agricultural output is anticipated to partners or a fall in commodity export nificant importer debt overhang. However, bounce back from the previous year's prices could undermine Argentina’s stabi- legislative and judicial challenges have ob- drought, aiding fiscal revenue and re- lization efforts. Persistent high inflation structed some deregulation efforts and as- serve accumulation. The current account could lead to a swift appreciation of the pects of the fiscal plan. balance is forecasted to reach a surplus real exchange rate, undermining competi- Inflation surged in December 2023, fueled of 0.9 percent of GDP, bolstered by a tiveness. Additionally, any further adjust- by the devaluation’s pass-through and the substantial trade surplus. The fiscal con- ments to the exchange rate might stoke in- lifting of key price controls, but it has been solidation initiative, along with the ef- flation expectations, jeopardizing the suc- on a gradual decline. Month-over-month fects of inflation on public finances, is cess of the stabilization program. TABLE 2 Argentina / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 10.7 5.0 -1.6 -2.8 5.0 4.5 Private consumption 10.4 9.7 1.6 -6.7 3.5 3.0 Government consumption 6.3 1.9 4.0 -13.6 4.5 0.9 Gross fixed capital investment 33.8 11.1 2.1 -23.6 12.7 12.8 Exports, goods and services 8.5 5.8 -12.7 26.8 6.5 5.0 Imports, goods and services 20.4 17.9 5.5 -15.2 7.2 5.3 Real GDP growth, at constant factor prices 10.4 4.9 -1.6 -2.8 5.0 4.5 Agriculture 1.9 -4.5 -24.0 23.0 1.0 2.0 Industry 15.5 5.7 0.7 -5.1 5.0 4.5 Services 9.4 6.0 0.3 -4.3 5.5 4.8 Current account balance (% of GDP) 1.4 -0.7 -3.5 0.9 0.9 1.0 Net foreign direct investment inflow (% of GDP) 1.1 2.1 3.1 1.5 1.4 1.6 a Fiscal balance (% of GDP) -4.3 -3.7 -4.2 0.0 0.7 -0.4 Revenues (% of GDP) 32.2 32.2 29.7 31.0 31.0 30.6 a Debt (% of GDP) 85.7 89.9 161.2 85.5 78.3 68.3 a Primary balance (% of GDP) -2.5 -1.7 -1.8 2.2 2.9 3.2 b,c International poverty rate ($2.15 in 2017 PPP) 0.9 0.6 0.8 1.1 0.9 0.7 b,c Lower middle-income poverty rate ($3.65 in 2017 PPP) 2.8 2.5 3.1 3.6 3.2 2.8 b,c Upper middle-income poverty rate ($6.85 in 2017 PPP) 11.4 10.9 12.4 15.1 13.8 12.8 GHG emissions growth (mtCO2e) 4.2 1.5 -2.8 -1.6 3.1 3.4 Energy related GHG emissions (% of total) 39.6 39.7 38.3 37.0 37.5 37.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Fiscal data refer to the general government. b/ Calculations based on SEDLAC harmonization, using 2022-EPHC-S2. c/ Projections using microsimulation methodology. MPO 3 Apr 24 nearly triple the national average. The most recent poverty data which dates to THE BAHAMAS Key conditions and 2013, estimated that 12.8 percent of the population lived below the Bahamas’ na- challenges tional poverty line. The nation also con- tends with significant inequality, as evi- Table 1 2023 The Bahamas is a small island state in denced by a GINI coefficient of 41.1 in Population, million 0.4 the Caribbean. Tourism is its primary dri- 2013, which is considerably higher than GDP, current US$ billion 14.7 ver of economic growth, particularly from the average for high-income countries. De- GDP per capita, current US$ 35730.0 key markets, such as the United States, spite these socioeconomic challenges, The a 86.8 School enrollment, primary (% gross) Canada, and the United Kingdom. The fi- Bahamas was ranked 57th in the Human a 71.6 nancial services sector, which is heavily Development Index (HDI) in 2022, which Life expectancy at birth, years Total GHG emissions (mtCO2e) 2.9 reliant on foreign investment, also plays is on par with its Caribbean peers. Source: WDI, Macro Poverty Outlook, and official data. a significant role. Following the global fi- The pandemic has exacerbated some of a/ WDI for School enrollment (2012); Life expectancy nancial crisis in 2008 economic growth the medium-term growth challenges, and (2021). decelerated to a modest average of 0.8 public finances have suffered as a result. percent between 2010 and 2019. This The country still faces elevated public slowdown can be attributed to several debt. In response, the government is pur- factors, such as the country's small size, suing fiscal consolidation through tax re- lack of productive diversification, high forms, enhanced tax administrations, and import dependence, and vulnerability to improvements in public financial man- natural disasters. In 2020, the economy agement. The Bahamas was recently re- In 2023, the economy expanded by 4.3 experienced a sharp contraction of 23.5 moved from the Financial Action Task percent, largely driven by a strong re- percent due to the pandemic’s impact, Force's grey list, reflecting its commit- covery in tourism. Fiscal and current but a resilient recovery ensued, and by ment to addressing financial crime. Fur- account deficits narrowed significantly; 2022, economic activity had rebounded to ther efforts are being made to enhance pre-pandemic levels. Anti-Money Laundering regulations and the unemployment rate declined but re- Despite this recovery, economic growth is supervision, ensuring full compliance mains high among young people. The constrained by capacity limits in tourism, with international standards. In October Bahamas made significant progress in vulnerability to external shocks, skill 2020, The Bahamas adopted a digital cur- strengthening its AML/CFT framework. shortages, and limited fiscal space. The Ba- rency to facilitate financial inclusion. hamas’ labor market is still facing chal- However, high public debt, global un- lenges, including restoring labor force par- certainty, and vulnerability to natural ticipation to its former level and address- disasters pose challenges for growth ing the high unemployment rate among Recent developments and poverty reduction. young adults. As of May 2023, labor force participation was at a low 75.9 percent, still In 2023, the GDP of The Bahamas grew at below the pre-pandemic level of 81 per- a solid 4.3 percent, following a robust re- cent. Additionally, the unemployment rate covery of 14.4 percent in 2022. This eco- for individuals aged 25-35 was 25 percent, nomic resurgence was broad-based, with FIGURE 1 The Bahamas / Real GDP growth and contributions FIGURE 2 The Bahamas / Fiscal balance and public debt to real GDP growth Percent, percentage points Percent of GDP Percent of GDP 30 120 4 20 100 0 10 80 -4 0 60 -10 -8 40 -20 -12 20 -30 2020 2021 2022 2023 e 2024 f 2025 f 2026 f 0 -16 Private Consumption Government Consumption Investment Net trade 2020 2021 2022 2023 e 2024 f 2025 f 2026 f Real GDP Growth Debt (lhs) Fiscal balance Primary balance Sources: Government of The Bahamas, IMF and World Bank staff calculations. Sources: Government of The Bahamas, IMF and World Bank staff calculations. MPO 4 Apr 24 tourism showing a particularly robust per- The robust economic rebound, coupled also projected to improve the domestic formance. The vigorous recovery con- with the gradual withdrawal of pandemic- supply of skilled workers, contributing to tributed to a reduction in the unemploy- related financial support, led to improved poverty reduction. Inflation is expected to ment rate to 8.8 percent, the lowest since public finances. This improvement oc- fall to 3.1 percent by end-2024, and to 2008. However, the unemployment rate curred despite tax relief measures to allevi- about 2 percent over the medium term. among young people remains elevated. In- ate inflationary pressures and an increase The government aims to achieve a fiscal ternational travel, including flights and in public sector wages. The fiscal deficit surplus by 2026, relying on greater cost re- cruise ship arrivals, surged past pre-pan- shrank to 4.1 percent of GDP in fiscal year covery from public corporations and mea- demic figures, reflecting strong tourist de- 2022/23. The central government's debt de- sures to improve spending efficiency that mand and successful government initia- creased from over 100 percent of GDP dur- would allow for spending cuts. Tax re- tives to attract new cruise lines and air- ing the pandemic to 83.2 percent by the forms are expected to further increase pri- lines. On average, cruise visitors spent 59 end of 2023. However, external sovereign mary surplus in the longer term, and simi- percent more in nominal terms in 2022 spreads remained high. Significant gross larly, increased expenditure on climate re- compared to 2019, while stayover visitors financing needs were largely met through silience is expected to contribute to this spent 18 percent more. domestic issuance and central bank loans. surplus. Such investments will ultimately The current account deficit narrowed to 6.2 reduce spending associated with natural percent of GDP, and the banking sector disaster recovery and mitigate the adverse showed strength with declining non-per- effects of natural disasters on GDP and, forming loans. Foreign exchange reserves Outlook consequently, on revenues. The trade were estimated to cover 4.9 months of im- deficit is expected to narrow, and inter- ports of goods and services at the end of The medium-term economic outlook is fa- national reserves are projected to remain 2023. Inflation, which peaked in July 2022 vorable, with real GDP growth projected above 4 months of imports. However, the at 7.1 percent y-o-y, primarily due to rising at 2.3 percent in 2024. Growth is expected economic forecast is subject to several costs of energy and food, began to subside. to moderate to 1.5 – 2 percent range in downside risks, including a potential de- The inflationary increase was largely at- the medium term due to capacity limits celeration in the United States due to mon- tributed to global factors, but a downturn in the tourism sector. The government ex- etary tightening, global uncertainty, re- in global energy prices facilitated a quick- pects long-term growth to be stimulated duced tourism demand from key source er-than-anticipated reduction in inflation, by investments in expanding hotel capac- markets, global price shocks, and the es- with the rate dropping to 3.4 percent by ity, with several FDI-financed projects al- calating threat of climate-induced natural the end of 2023, offering some relief to ready in the pipeline. These investments, disasters. Addressing labor market chal- poor households that are particularly vul- along with investments in other sectors of lenges and bolstering climate resilience are nerable to inflation, as it can significantly the economy, are expected to lead to job crucial strategies to mitigate these poten- erode their purchasing power. creation. Enhanced education policies are tial adverse effects. TABLE 2 The Bahamas / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 17.0 14.4 4.3 2.3 1.8 1.6 Private consumption 23.3 7.7 4.2 2.1 1.9 1.6 Government consumption 12.5 19.0 4.1 2.0 1.7 1.5 Gross fixed capital investment 12.4 -9.7 3.3 3.2 3.1 2.0 Exports, goods and services 22.6 39.9 10.2 10.0 8.8 8.4 Imports, goods and services 10.3 1.7 10.0 10.5 10.1 9.0 Real GDP growth, at constant factor prices 8.1 9.3 4.3 2.3 1.8 1.6 Agriculture -32.4 29.7 11.6 5.1 4.3 4.0 Industry -14.8 10.2 4.0 2.9 2.7 2.7 Services 11.7 9.0 4.3 2.2 1.7 1.5 Inflation (consumer price index) 2.9 5.6 3.4 3.1 2.6 2.2 Current account balance (% of GDP) -21.1 -8.2 -6.2 -6.1 -5.8 -5.7 Net foreign direct investment inflow (% of GDP) 2.6 2.5 2.5 3.0 3.0 3.0 a Fiscal balance (% of GDP) -6.2 -4.1 -2.5 -2.1 -1.7 -1.2 Revenues (% of GDP) 22.6 22.1 21.8 22.0 22.0 22.0 a Debt (% of GDP) 95.3 88.6 83.2 81.9 80.8 79.5 a Primary balance (% of GDP) -1.4 0.3 1.8 2.2 2.5 2.7 GHG emissions growth (mtCO2e) -3.5 1.1 4.0 3.0 0.8 0.1 Energy related GHG emissions (% of total) 86.0 86.1 86.1 85.9 85.6 85.3 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Fiscal balances are reported in fiscal years (July 1st -June 30th). MPO 5 Apr 24 of the population was covered by at least one social protection benefit in 2021. BARBADOS Key conditions and However, social assistance to vulnerable groups through the National Assistance challenges Program covered only 5,800 beneficiaries in 2020. Social insurance, operated by the Table 1 2023 Barbados confronts several challenges, in- National Insurance Scheme (NIS), faces Population, million 0.3 cluding its small size, its high dependence longer-term challenges due to increasing GDP, current US$ billion 6.2 on tourism from a few key markets, import expenditure on old-age pensions as a re- GDP per capita, current US$ 22144.0 dependency, and vulnerability to external sult of an aging population. a 95.6 School enrollment, primary (% gross) shocks, including from climate change. It a 77.6 is highly affected by increases in import Life expectancy at birth, years Total GHG emissions (mtCO2e) 3.5 prices, especially from the US. The Central Source: WDI, Macro Poverty Outlook, and official data. Bank has limited tools to address rising Recent developments a/ WDI for School enrollment (2022); Life expectancy inflation. High public debt levels, exacer- (2021). bated by the recent economic downturn, In 2023, real GDP expanded by an estimat- reduced fiscal space. However, the Gov- ed 4.5 percent as tourist arrivals increased ernment continues to implement the BERT by 19 percent between January and Sep- 2022 plan, which seeks to reduce public tember, pushing GDP above its pre-pan- Barbados’ economy grew at 4.5 percent debt to about 60 percent of GDP by 2035/ demic level. The recovery in tourism also 36, incentivize a transition to green energy, led to significant overall growth in the ser- in 2023, exceeding pre-pandemic levels diversify the economy, and improve com- vices sector, particularly in areas such as as the number of tourists returned to petitiveness. It also includes a pledge to hotels, retail trade, and entertainment, and pre-2019 levels. The resurgence of the social cohesion, with investment in edu- in the agriculture sector which benefited economy is expected to alleviate poverty cation and health, provision of affordable from increased demand for local produce, and improve households’ living condi- housing, and enhanced social safety nets. also a result of the tourism upturn. Manu- Barbados was one of the first countries to facturing led the industrial sector to a 5.0 tions. The government continues to im- receive financial support from the IMF percent rebound in 2023. plement the Barbados Economic Recov- through the Resilience and Sustainability The primary fiscal balance reached 2.3 ery and Transformation (BERT) plan, Facility (RSF) through a program ap- percent of GDP in the first half of which seeks to increase the primary sur- proved in December 2022. FY2023/24, exceeding the government’s There have been no official poverty esti- target of 1.7 percent. The overall fiscal plus, enhance debt sustainability, and mates since 2017. In 2016, approximately balance recorded a deficit of 0.5 percent reduce external and natural disaster-re- a quarter of the population lived below of GDP, down from 2.3 percent of GDP lated vulnerabilities. A slowdown in Barbados’ basic needs threshold, and 3.4 in the first half of FY2022/23, as revenues tourism source markets, increases in percent of households could not afford continued to recover, and pandemic-re- global oil prices, and climate change even a minimum food basket. The pover- lated spending was phased out. The pub- ty rate was higher among females, fe- lic debt-to-GDP ratio is estimated at represent latent risks. male-headed households, and larger 111.8 percent at the end of 2023, down households. Approximately 55.3 percent from 122.3 percent at the end of 2022. FIGURE 1 Barbados / Real GDP growth and contributions to FIGURE 2 Barbados / Fiscal balances and public debt real GDP growth Percent, percentage points Percent of GDP Percent of GDP 15 160 6 10 140 4 120 5 2 100 0 80 0 -5 60 -2 -10 40 -4 -15 20 2020 2021 2022 2023 e 2024 f 2025 f 2026 f Agriculture Industry 0 -6 Services Net taxes on production 2020 2021 2022 2023 e 2024 f 2025 f 2026 f Real GDP Growth Debt (lhs) Fiscal balance Primary balance Sources: Government of Barbados, IMF and World Bank staff calculations. Sources: Government of Barbados, IMF and World Bank staff calculations. MPO 6 Apr 24 The government has taken several mea- to higher employment, with unemploy- 2025. The government plans to decrease sures to strengthen fiscal management, in- ment claims reverting to pre-pandemic transfers to state-owned entities and per- cluding the establishment of a Fiscal Coun- levels. Unemployment stood at 8.3 percent sist modernizing tax exemptions, bolster- cil to ensure transparency and accountabil- in July-September 2023, a substantial y-o-y ing revenue administration, and improv- ity in fiscal strategy implementation. decline from 12.4 percent in the same pe- ing public financial management. The The Central Bank of Barbados has kept riod a year earlier and compared to 10.1 current account deficit is forecasted to its benchmark rate at 2 percent. Inflation percent in the second quarter of 2019. The narrow to 6.2 percent of GDP by 2025, moderated, falling to 4.4 percent by the difference in the unemployment rate of driven by anticipated robust performance end of 2023 from a peak of 6.7 percent women and men is relatively small, at 8.6 in the tourism sector, reduced commodity in May 2022, driven by lower internation- and 8.1 percent respectively. prices, and aided by fiscal consolidation. al fuel prices and freight costs. Howev- At the same time, government initiatives er, some domestic factors, such as pro- to combat climate change and to improve longed drought conditions and higher de- business environment are expected to mand for restaurants and recreational ac- Outlook stimulate investment. Overall, the gov- tivities, have pushed up the prices of cer- ernment's commitment to fiscal consoli- tain food items and domestic services. Ef- The economy is projected to continue re- dation, climate resilience, and debt sus- forts to improve monetary and financial covering, with real GDP expected to ex- tainability, along with ongoing support sector policies have led to a well-capital- pand annually by around 3.7 percent in from international financial institutions, ized, liquid, and profitable banking sys- 2024 and 2.8 percent in 2025. Efforts to im- sets the stage for continued progress in tem, with credit to the non-financial pri- plement structural reforms, enhance fiscal the country's reform agenda. The outlook vate sector experiencing a modest growth institutions, and promote investments in remains subject to risks, including poten- of 1.7 percent. The international reserves renewable energy projects are expected to tial global economic and financial shocks, position continued to strengthen, with the support sustainable and inclusive growth. climate-related natural disasters, and an current account deficit narrowing to an Inflation is projected to reach 3.7 percent intensification of regional conflicts in oth- estimated 8.1 percent of GDP in 2023 and in 2024 and decline below 3 percent there- er parts of the world, which could impact foreign reserves reaching an estimated 6.1 after. Fiscal consolidation is expected to global commodity prices and raise infla- months of imports of goods. continue, with the fiscal deficit falling to tion. The level of public debt remains The labor market also showed improve- 0.4 percent of GDP and the primary sur- high and exacerbates the potential impact ment in 2023. The rebound in tourism led plus increasing to 4.5 percent of GDP by of these risks. TABLE 2 Barbados / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices -0.8 11.3 4.5 3.7 2.8 2.3 Real GDP growth, at constant factor prices -0.8 11.3 4.5 3.7 2.8 2.3 Agriculture -10.4 -6.4 3.0 3.0 3.0 3.0 Industry -6.3 5.0 3.6 2.9 2.8 2.4 Services 0.6 12.9 4.7 3.8 2.8 2.3 Inflation (consumer price index) 3.1 9.2 5.0 3.7 2.8 2.4 Current account balance (% of GDP) -10.5 -10.3 -8.1 -7.2 -6.2 -5.8 Fiscal balance (% of GDP) -4.5 -2.1 -1.9 -1.2 -0.4 -0.1 Revenues (% of GDP) 27.7 27.9 28.5 30.2 30.2 30.3 Debt (% of GDP) 129.1 122.3 111.8 104.6 98.7 93.5 Primary balance (% of GDP) -0.8 2.5 3.3 4.0 4.5 4.6 GHG emissions growth (mtCO2e) -3.6 -1.2 1.8 1.1 0.8 0.6 Energy related GHG emissions (% of total) 25.0 23.6 24.2 24.1 23.7 23.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. MPO 7 Apr 24 Data on monetary poverty indicate that in 2018, 9 percent of the population could not BELIZE Key conditions and afford a minimum food basket, and 52 per- cent were unable to afford a minimum challenges food and non-food basket. Income inequal- ity, as measured by the Gini coefficient, Table 1 2023 Belize, an upper middle-income country, stood high at 0.49. Based on labor force Population, million 0.4 is heavily dependent on tourism, its pri- survey data, the Statistical Institute of Be- GDP, current US$ billion 3.3 mary source of foreign exchange, along lize estimated that 35.7 percent of the pop- GDP per capita, current US$ 7988.0 with agriculture and remittances. The ulation was multi-dimensionally poor in a 99.9 School enrollment, primary (% gross) country’s economic performance is close- 2021. There are notable geographic and de- a 70.5 ly tied to the US, the main source of mographic differences in poverty rates. In Life expectancy at birth, years Total GHG emissions (mtCO2e) 7.0 tourists and remittances, the principal ex- 2021, the southern district of Toledo report- Source: WDI, Macro Poverty Outlook, and official data. port destination, and a key provider of ed the highest rate of multi-dimensional a/ WDI for School enrollment (2022); Life expectancy FDI. With its exchange rate pegged to the poverty at 60 percent and the rate for Belize’s (2021). dollar and its status as a net importer of Maya population reached 61 percent. oil and gas, Belize is strongly affected by fluctuations in energy prices. The country is also highly exposed to climate-related Belize’s economy is recovering from the shocks, such as flooding, wind damage, Recent developments and coastal erosion. COVID-19 pandemic with robust Belize is gradually emerging from a chal- In 2023, Belize’s economy experienced ro- growth, lower debt, a primary surplus, lenging period of economic instability and bust growth, with real GDP increasing by 4.5 and an improved current account. In large fiscal imbalances, which were inten- percent, driven in large part by tourism, con- 2023, GDP grew by 4.5 percent, inflation sified by the COVID-19 pandemic. It has struction, and various services. Favorable slowed, and unemployment remained low made notable progress in reducing its pub- weather conditions in 2023, coupled with in- lic debt through debt restructuring and a creases in livestock production, animal feed at 4 percent (albeit labor force participa- blue bond issuance, although debt servic- production, and domestic agricultural pro- tion is low too). The country still faces ing costs remain high. It has also made cessing, alongside high global sugar prices, persistent poverty and inequality, depen- progress in strengthening fiscal manage- contributed to the accelerated growth of the dence on tourism and energy imports, ment by building fiscal buffers that could agriculture sector. As a result, real GDP was help maintain a counter-cyclical fiscal 16 percent higher than pre-pandemic levels, and exposure to climate shocks. The gov- stance and enhance fiscal discipline. De- and the unemployment rate decreased sig- ernment has taken steps to strengthen fis- spite these advancements, the business en- nificantly from 10.4 percent before the pan- cal management, but reforms to improve vironment faces significant challenges, demic to 4 percent in 2023. However, labor the business environment are critical to such as restricted credit to the private sec- force participation, which had declined boost jobs, investment, and growth over tor, important infrastructure barriers, skills rapidly during the pandemic, remained de- shortages, and elevated levels of crime and pressed. It is particularly low for women the medium term. violence, all of which impede job creation, (44.5percent)comparedtomen(71.4percent growth, and efforts to alleviate poverty. formen)andforthosewhoarelesseducated. FIGURE 1 Belize / Real GDP growth and contributions to FIGURE 2 Belize / Fiscal balances and public debt real GDP growth Percent, percentage points Percent of GDP Percent of GDP 20 120 2 15 0 100 10 -2 80 5 -4 0 60 -6 -5 40 -8 -10 20 -10 -15 2020 2021 2022 2023 e 2024 f 2025 f 2026 f 0 -12 Private Consumption Government Consumption 2020 2021 2022 2023e 2024f 2025f 2026f Investment Net trade Real GDP Growth Debt (lhs) Fiscal balance Primary balance Sources: Government of Belize, IMF and World Bank staff calculations. Sources: Government of Belize, IMF and World Bank staff calculations. MPO 8 Apr 24 Average consumer price inflation slowed trade for the country resulting from the with an expected real GDP growth of from 6.3 percent in 2022 to 4.4 percent in dynamics of global commodity prices and 3.5 percent in 2024 and 2.5 percent 2023. The fiscal position has improved the recovery in tourism. from 2025 onwards. Inflation is expect- over recent years, with public debt de- The Central Bank of Belize focused its ed to further decline to 3.1 percent in creasing from 103 percent of GDP in 2020 monetary policy on supporting overall 2024 and 2 percent over the medium to 66.3 percent in 2023, due to high growth, economic stability and growth, including term. This positive outlook, coupled fiscal consolidation, and debt restructur- maintaining an adequate level of interna- with new policy initiatives to enhance ing. However, the primary fiscal surplus tional reserves to strengthen the currency the formalization of small and medi- slightly deteriorated in 2023, from 1.3 per- peg, which is essential for promoting con- um enterprises and improve social as- cent of GDP in 2022 to 0.8 percent of GDP. fidence in the local currency. Gross inter- sistance, could contribute to poverty Revenues and grants as a share of GDP national reserves amounted to 3.4 months reduction. The fiscal position is expect- saw a slight decrease from 24 percent of of imports at the end of 2023. ed to remain robust but public debt is GDP in 2022 to 23.2 percent in 2023. Non- Financial soundness indicators improved projected to decline more slowly going interest expenditures as a share of GDP de- in 2023, with domestic banks’ regulatory forward, remaining above 50 percent creased slightly from 22.7 percent in 2022 capital increasing, non-performing loans of GDP over the next decade. to 22.4 percent in 2023. The overall budget decreasing, and returns on assets rising. There are important external risks, in- deficit amounted to 1.5 percent of GDP. However, there are still concerns about cluding higher global commodity prices, Belize has made significant efforts to en- high non-performing loans, low capital vulnerability to climate-related disasters, hance resilience to climate change and nat- buffers, and tight liquidity in some banks higher-than-expected global interest ural disasters by investing in climate-re- compared to the pre-pandemic period, rates, and persistent vulnerabilities in the silient crops and infrastructure. The gov- which could limit investment and real banking sector. ernment is also working on implementing GDP growth in the future. Belize’s key policy priorities for 2024-2026 a Disaster Resilience Strategy that focuses include reducing public debt, increasing on improving structural, financial, and government revenues to finance priority post-disaster resilience. spending on infrastructure, targeted social The current account showed a notable im- Outlook programs, crime prevention, implement- provement in 2023, narrowing from 8.3 ing structural reforms to improve the busi- percent of GDP in the previous year to 3.6 Belize’s economy is projected to perform ness environment, and remaining vigilant percent, reflecting more favorable terms of reasonably well over the medium term, to financial stability risks. TABLE 2 Belize / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 17.9 8.7 4.5 3.5 2.5 2.5 Private consumption 16.9 8.0 4.9 3.5 2.5 2.5 Government consumption 16.7 6.6 5.3 3.7 2.6 2.6 Gross fixed capital investment 26.0 12.8 9.5 5.2 4.4 4.3 Exports, goods and services 36.4 11.5 8.1 7.6 7.0 6.7 Imports, goods and services 32.1 10.2 9.7 7.4 7.0 6.8 Real GDP growth, at constant factor prices 17.2 6.3 4.5 3.5 2.5 2.5 Agriculture 24.2 -0.8 8.6 6.0 4.5 4.3 Industry 15.1 -1.9 3.3 3.2 3.0 3.0 Services 16.6 9.8 4.1 3.2 2.0 2.0 Inflation (consumer price index) 3.2 6.3 4.4 3.1 2.3 2.0 Current account balance (% of GDP) -6.5 -8.3 -3.6 -1.9 -2.0 -2.0 Net foreign direct investment inflow (% of GDP) 5.1 4.7 4.2 2.5 2.4 2.3 a Fiscal balance (% of GDP) -1.4 -0.6 -1.5 -1.4 -1.3 -1.3 Revenues (% of GDP) 23.4 24.0 23.2 23.2 23.2 23.2 a Debt (% of GDP) 82.3 67.1 66.3 63.6 61.9 61.0 a Primary balance (% of GDP) 0.0 1.3 0.8 1.0 1.0 1.0 GHG emissions growth (mtCO2e) 0.0 0.0 -0.1 -0.1 -0.1 0.0 Energy related GHG emissions (% of total) 10.3 11.3 12.1 12.8 13.5 14.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Fiscal balances are reported in fiscal years (April 1st -March 31st). MPO 9 Apr 24 limits their ability to respond swiftly to economic shocks. BOLIVIA Key conditions and The ongoing demographic transition, in- creasing urbanization, and a more educat- challenges ed workforce are increasing the urgency of generating more and better jobs. Fos- Table 1 2023 The Government's state-led development tering foreign and private investment, as Population, million 12.4 strategy focused on import substitution, well as productivity growth among small GDP, current US$ billion 45.8 natural resource extraction, and public in- and medium-sized enterprises, is critical GDP per capita, current US$ 3699.8 vestment through state-owned enterprises to accelerate growth and job creation and a 2.0 International poverty rate ($2.15) has led to structurally high fiscal deficits, would benefit from reducing red tape, re- a 5.4 dwindling reserves, and a loss of access moving tax distortions, modernizing labor Lower middle-income poverty rate ($3.65) a 15.2 to international capital markets. Macro- regulations, improving transport and lo- Upper middle-income poverty rate ($6.85) Gini index a 40.9 economic imbalances have been com- gistics, easing agricultural export restric- School enrollment, primary (% gross) b 96.4 pounded by structural weaknesses, in- tions, and fostering environmentally and b 63.6 cluding a narrow export base, a decline in socially sustainable mining. Life expectancy at birth, years gas production, and a weak business en- Total GHG emissions (mtCO2e) 136.6 vironment that is depressing private-sec- Source: WDI, Macro Poverty Outlook, and official data. tor investment. As a consequence, growth a/ Most recent value (2021), 2017 PPPs. b/ WDI for School enrollment (2012); Life expectancy is slowing significantly, and the country Recent developments (2021). now has very limited buffers to respond to external and climate shocks. A credible The economy expanded by an estimated medium-term plan to reduce the fiscal 2.4 percent in 2023 as it continued to After expanding an estimated 2.4 percent deficit, improve the business environ- slow due to declining gas exports, dollar in 2023, the economy is expected to slow ment, and strengthen institutions is crit- and fuel shortages, political tensions, and ical to address macroeconomic imbal- a severe drought. Subsidies and a fixed further as macroeconomic imbalances in- ances, ignite new sources of growth, and exchange rate helped keep inflation low creasingly weigh on growth and prevent reinvigorate poverty reduction. at 2.1 percent in December 2023 (y-o- poverty reduction. Limited access to ex- Fiscal sustainability and performance y change). The 12-month rolling fiscal ternal financing, increased economic un- could be enhanced by transitioning from deficit increased from 7.1 percent of GDP universal fuel subsidies to more targeted in December 2022 to 7.6 percent in June certainty, and low levels of international support mechanisms, rationalizing public 2023 as declining gas exports, high sub- reserves will continue to constrain public investment, including in state-owned en- sidies, and rising interest payments more spending and private sector activity. Bo- terprises, making public procurement than offset the reduction in capital expen- livia would benefit from implementing a more efficient, and improving focus and diture. Public debt increased to an esti- medium-term strategy to address macro- progressivity of subsidies and social mated 84 percent of GDP in 2023, with spending. Current social assistance pro- the Government working on getting leg- economic imbalances, enhance fiscal poli- islative approval for external loans and grams are not effectively supporting the cy efficiency and progressivity, and foster poor and vulnerable, with modest benefits tapping into pension funds financing, private investment-led growth. not indexed to inflation, and their design crowding out the financial sector. FIGURE 1 Bolivia / Public debt and international reserves FIGURE 2 Bolivia / Actual and projected poverty rates and real GDP per capita Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 100 45 4500 Public debt 40 4000 80 35 3500 International reserves 30 3000 60 25 2500 20 2000 40 15 1500 10 1000 20 5 500 0 0 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 0 International poverty rate Lower middle-income pov. rate 2010 2012 2014 2016 2018 2020 2022 2024 2026 Upper middle-income pov. rate Real GDP pc Sources: Central Bank of Bolivia and Ministry of Economy and Public Finance. Source: World Bank. Notes: see Table 2. MPO 10 Apr 24 Growth of employment and labor force par- a severe shortage of U.S. dollars and a sig- in 2024 and 2025 amid the economic ticipation rates decelerated throughout nificant difference between the official ex- slowdown and weak private investment. 2022 and came to a halt in 2023 due to the change rate and the parallel market rate. The purchasing power of poor and vul- slowdown in economic activity. Underem- In February 2024, the Government agreed nerable households is expected to erode ployment stood at 6.3 percent (2023 Q3), still with the private sector to ease the agricul- given mounting inflationary pressures above pre-pandemic levels (4.5 percent in tural export restrictions subject to a com- and the failure to adjust the value of ex- 2019 Q3). Labor informality remains high, mitment to supply the domestic market isting cash transfers to rising prices. Infla- with only 26.5 percent of workers covered and deposit the dollars in the financial sys- tion is expected to increase to 4.4 in 2024 by social security. Real household income tem. Still, it expressed a strong commit- as dollar shortages, political tensions, and is expected to stagnate in 2023 due to slug- ment to preserve the exchange rate peg. social unrest generate import constraints gish growth in real wages, alongside mod- and supply bottlenecks. erate real growth in remittances, and social The current account deficit is projected assistance cash transfers failing to keep to remain close to 2.5 percent due to low pace with inflation. In this context, poverty Outlook commodity prices and declining natural levels are anticipated to remain largely un- gas production. The impact of mobilizing changed at 17 percent in 2023 (measured at Growth is expected to decline to 1.4 in 2024 foreign and public investment in lithium the upper middle-income line of US$6.85/ as existing macroeconomic imbalances in- development and gas exploration is ex- day in 2017 PPP). creasingly limit private consumption and pected to be limited during the projec- The country's external situation weakened El Niño continues to impact agricultural tion period due to the long investment in 2023. The current account balance is es- output in the first half of 2024. Dollar horizons. Limited access to external fi- timated to have fallen to -2.3 percent of shortages are expected to continue as the nancing and falling international reserves GDP, driven by a shift from a trade surplus measures agreed with the private sector to will constrain public spending, including of US$1.8 billion in 2022 to a deficit of ease export restrictions are not part of a public investment. US$585 million in 2023 due to a decrease strategy to address the underlying unsus- Depleted macroeconomic policy buffers in gas exports and increased fuel imports. tainable fiscal balances. The fiscal deficit increasingly expose the economy to The country's international reserves de- will continue at high levels due to falling downside risks, including lower com- clined to 1.7 billion dollars at the end of the hydrocarbon revenues and high subsidies. modity prices and natural disasters. Po- year, a value close to the legal minimum Public debt, including with the Central litical tensions limit the room to address level of 22 tons of gold, due to declining Bank, will increase from 80 percent in 2022 imbalances and the capacity to maneuver gas export earnings, elevated government to 87 percent in 2026 (Figure 1). in a more adverse economic context that subsidies, repayments on foreign debt, and Poverty is expected to remain constant at could shift market sentiment and erode gold sales. These dynamics contributed to around 17 percent (US$6.85/day in 2017 PPP) confidence in the boliviano. TABLE 2 Bolivia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 6.1 3.5 2.4 1.4 1.5 1.5 Private consumption 5.3 4.2 2.3 2.2 2.1 2.0 Government consumption 5.4 4.0 1.9 -1.4 -0.8 -0.3 Gross fixed capital investment 11.9 6.5 5.7 -0.2 -0.7 -0.2 Exports, goods and services 15.4 15.6 -15.4 1.8 3.0 2.9 Imports, goods and services 15.7 7.6 0.6 1.2 1.5 1.6 Real GDP growth, at constant factor prices 6.4 3.5 2.5 1.4 1.6 1.6 Agriculture 1.8 3.7 3.0 3.4 4.4 4.4 Industry 9.6 1.0 1.0 0.8 0.8 0.8 Services 5.8 5.3 3.5 1.2 1.3 1.2 Inflation (consumer price index) 0.7 1.7 2.6 4.4 4.5 4.5 Current account balance (% of GDP) 2.2 -0.4 -2.3 -2.6 -2.5 -2.5 Net foreign direct investment inflow (% of GDP) 1.2 0.7 0.7 0.7 0.7 0.7 Fiscal balance (% of GDP) -9.3 -7.1 -7.2 -6.8 -6.4 -6.5 Revenues (% of GDP) 25.1 26.6 26.4 26.2 25.8 24.4 Debt (% of GDP) 81.6 80.1 83.6 85.5 86.2 86.5 Primary balance (% of GDP) -7.9 -5.5 -5.4 -4.7 -4.1 -4.3 a,b International poverty rate ($2.15 in 2017 PPP) 2.0 3.0 3.4 3.8 4.1 4.2 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 5.4 6.5 6.9 7.3 7.7 7.8 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 15.2 16.9 17.0 17.2 17.4 17.3 GHG emissions growth (mtCO2e) 2.7 0.5 0.7 0.6 0.8 0.9 Energy related GHG emissions (% of total) 15.5 16.0 16.6 17.2 17.9 18.6 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SEDLAC harmonization, using 2021-EH. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 11 Apr 24 fiscal framework to anchor public finances and adopted a historical constitutional re- BRAZIL Key conditions and form of its indirect taxation system. The new framework, which combines an ex- challenges penditure rule with primary balance tar- gets, aims to improve predictability. How- Table 1 2023 Brazil’s economy rebounded quickly ever, adherence to this framework will ne- Population, million 204.1 from the COVID-19 pandemic, emerging cessitate significant efforts to increase rev- GDP, current US$ billion 2173.5 from a prolonged slump that began in enues. The tax reform centers on replacing GDP per capita, current US$ 10646.8 2015. However, productivity has re- several existing indirect taxes with a dual a 3.5 International poverty rate ($2.15) mained stagnant for more than two value-added tax over the next decade. The a 8.4 decades, specifically in manufacturing reform is expected to streamline the tax Lower middle-income poverty rate ($3.65) a 23.5 and services. Achieving faster and sus- system, reduce economic distortions, and Upper middle-income poverty rate ($6.85) Gini index a 52.0 tained long-term growth will require sig- boost business productivity. School enrollment, primary (% gross) b 103.5 nificant reforms to boost the competi- b 72.8 tiveness and productivity of the econo- Life expectancy at birth, years my, including a better business environ- Total GHG emissions (mtCO2e) 2151.6 ment, a reduction in financial and prod- Recent developments Source: WDI, Macro Poverty Outlook, and official data. uct market distortions, increased infra- a/ Most recent value (2022), 2017 PPPs. b/ Most recent WDI value (2021). structure investment, deeper integration In 2023, real GDP grew by 2.9 percent, into global value chains, and improve- driven by a strong harvest, exports, and ments in education quality. Brazil’s de- robust private consumption. Inflation mographic structure is changing rapid- moderated to 4.6 percent, falling within ly as the working-age population shrinks the Central Bank’s target range (1.75 to In 2023, GDP growth reached 2.9 per- and the aging population grows, exerting 4.75 percent) and significantly below the cent thanks to a bumper harvest, reced- pressure on pensions and healthcare ex- peak of 12.1 percent in April 2022. Con- ing inflation pressures, and a robust la- penditures. The long-term effects of the sequently, the Central Bank began to ease bor market. This, along with Bolsa pandemic on human capital are evi- monetary policy in August, reducing the denced by Brazil’s 2021 Human Capital policy rate from 13.75 percent to 10.75 Família expansion, helped reduce pover- Index falling below 2009 levels. Although percent by March 2024. Real credit ty. In 2024, economic activity is expect- progress in reducing poverty has been in- growth slowed to 3.1 percent in 2023 ed to moderate and fiscal risks will in- consistent since the pandemic, the pover- from 8.3 percent in 2022, driven by re- crease as the zero primary deficit target ty rate (measured at $6.85/day per capita, duced credit to firms. The current ac- imposes an urgent need to increase rev- 2017 PPP) fell from 28.2 to 23.5 percent count deficit shrank to 1.3 percent of between 2012 and 2022. Inequality re- GDP, fully covered by net FDI inflows of enues and contain expenditures. In the mains high, with limited progress in non- 1.6 percent of GDP. absence of significant fiscal adjustment, monetary aspects of poverty. The primary deficit reached 2.3 percent of concerns over debt stabilization remain. Brazil has been grappling with high public GDP in 2023, from a surplus of 1.2 percent debt amidst tepid growth. In 2023, the gov- in 2022, due to declining tax revenues, a ernment introduced a new medium-term significant rise in social transfers, and an FIGURE 1 Brazil / Fiscal deficit and public debt FIGURE 2 Brazil / Actual and projected poverty rates and real GDP per capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 100 16 Public debt (lhs) 30 6800 Primary deficit 14 6600 90 Overall deficit 25 12 6400 10 20 80 6200 8 15 6000 70 6 5800 4 10 60 5600 2 5 5400 0 50 -2 0 5200 2012 2014 2016 2018 2020 2022 2024 2026 40 -4 International poverty rate Lower middle-income pov. rate 2010 2012 2014 2016 2018 2020 2022 Upper middle-income pov. rate Real GDP pc Source: Central Bank of Brazil. Source: World Bank. Notes: see Table 2. MPO 12 Apr 24 unusually large payment of judicial debts workers, is anticipated to slow. The real (0.9 percent of GDP). High debt service minimum wage is expected to increase costs also increased, reaching 6.6 percent Outlook by 3.1 percent in 2024. However, this of GDP (from 5.8 percent in 2022). With may be partly offset by a 12.5 percent av- this, gross debt grew to 74.4 percent of GDP growth is expected to moderate to erage increase in fuel prices (LPG, gaso- GDP in 2023 (from 71.7 percent in 2022). 1.7 percent in 2024 as the lagging effect of line, ethanol, and diesel) due to the expi- In 2023, the poverty rate continued to high-interest rates slows economic activity ration of tax breaks, affecting households’ decline, reaching 21.5 percent (US$ 6.85 and as agricultural output normalizes after purchasing power. per day, 2017 PPP), a reflection of im- 2023's bumper harvest. Inflation is expect- Key macroeconomic risks stem from the proved economic conditions and social ed to gradually converge to about 3.5 per- need for fiscal consolidation to meet pri- protection policies. Unemployment fell cent by 2025, allowing for the gradual eas- mary balance targets, stabilize public to 7.4 percent, the lowest since 2014. ing of monetary policy and contributing to debt, and anchor inflation expectations. Formality rates remained unchanged, faster growth in 2025. But growth is ex- This requires new revenue measures or while average real wages rose by 6.2 pected to remain at around 2 percent over expenditure controls that may encounter percent in the first three quarters of the medium term, given persistent struc- significant political resistance. Addition- 2023, notably in the services sector, tural constraints to productivity growth. ally, the continuation of El Nino could which employs the majority of the poor The current account deficit is expected to suppress agricultural output and increase workforce. The Bolsa Família Program remain moderate and fully financed by food and energy prices. Ample reserves, was responsible for two thirds of the FDI. With a focus on curbing expenditure low external debt, and a resilient financial annual poverty reduction due to the ex- growth and increasing tax revenues, the system offer important macroeconomic pansion of its coverage by 2 million primary deficit is projected to improve to buffers, but the political consensus families (reaching 21.3 million), while 0.4 percent of GDP in 2024 and to reach around fiscal adjustment measures will the average monthly transfer increased a surplus of 0.7 percent of GDP by 2026. continue to be critical for debt stabiliza- from R$395 to R$670. Additionally, the Public debt is anticipated to stabilize at tion. While further economic growth may real minimum wage was raised by 2.8 around 77.4 percent of GDP by 2026. marginally contribute to poverty reduc- percent, benefiting approximately 1 in Poverty reduction may be limited in 2024 tion in the coming years, insufficient in- 4 households in the bottom 40 percent as growth in agriculture and services, the vestments in human capital and social in- with at least one formal worker. latter employing 80.1 percent of poor frastructure could impede progress. TABLE 2 Brazil / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 4.8 3.0 2.9 1.7 2.2 2.0 Private consumption 3.0 4.1 3.1 1.5 2.2 2.0 Government consumption 4.2 2.1 1.7 1.2 1.7 1.7 Gross fixed capital investment 12.9 1.1 -3.0 1.7 1.5 1.3 Exports, goods and services 4.4 5.7 9.1 3.0 3.0 3.0 Imports, goods and services 13.8 1.0 -1.2 2.0 2.3 2.5 Real GDP growth, at constant factor prices 4.5 3.1 3.0 1.7 2.2 2.0 Agriculture 0.0 -1.1 15.1 0.0 2.0 2.0 Industry 5.0 1.5 1.6 1.5 1.7 1.7 Services 4.9 4.1 2.1 2.0 2.4 2.1 Inflation (consumer price index) 8.3 9.3 4.6 3.9 3.7 3.4 Current account balance (% of GDP) -2.8 -2.5 -1.3 -1.8 -2.1 -2.3 Net foreign direct investment inflow (% of GDP) 1.8 2.1 1.6 2.0 2.2 2.5 Fiscal balance (% of GDP) -4.2 -4.6 -8.8 -7.1 -5.1 -4.6 Revenues (% of GDP) 35.4 37.6 34.7 34.3 34.6 34.4 Debt (% of GDP) 77.3 71.7 74.4 77.2 77.3 77.4 Primary balance (% of GDP) 0.7 1.2 -2.3 -0.4 0.4 0.7 a,b International poverty rate ($2.15 in 2017 PPP) 5.8 3.5 1.6 1.6 1.6 1.6 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 11.3 8.4 6.4 6.4 6.3 6.3 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 28.4 23.5 21.5 21.3 21.2 21.0 GHG emissions growth (mtCO2e) 15.2 -8.3 -8.1 -4.8 -4.6 -4.7 Energy related GHG emissions (% of total) 17.0 17.6 19.7 20.1 20.8 21.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SEDLAC harmonization, using 2022-PNADC-E1. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 13 Apr 24 revenues to fund social spending was rejected in Congress. A revised, scaled CHILE Key conditions and back tax reform with an enhanced focus on tax compliance is being debated in challenges Congress. A pension reform proposal to increase contributions and replacement Table 1 2023 Chile has a strong track record of sound rates is also in Congress. The proposed Population, million 19.6 macroeconomic policies and solid institu- reform also includes a solidarity share of GDP, current US$ billion 345.6 tions. However, large fiscal transfers and additional contributions. GDP per capita, current US$ 17605.4 pension fund withdrawals generated sig- a 0.4 International poverty rate ($2.15) nificant macroeconomic imbalances dur- a 0.9 ing the COVID-19 pandemic, including Lower middle-income poverty rate ($3.65) Upper middle-income poverty rate ($6.85) a 4.7 high fiscal and current account deficits and Recent developments Gini index a 43.0 double-digit annual inflation. After strong School enrollment, primary (% gross) b 99.4 fiscal and monetary tightening, macroeco- Real GDP rose by 0.2 percent in 2023, as b 78.9 nomic imbalances have largely been re- domestic demand adjusted after tighter Life expectancy at birth, years solved, but growth stagnated in 2023. macroeconomic policies during the post- Total GHG emissions (mtCO2e) 52.4 Despite being the world’s largest exporter of Covid period. Services have shown re- Source: WDI, Macro Poverty Outlook, and official data. copper and a major producer of lithium, a silience, but construction, commerce, and a/ Most recent value (2022), 2017 PPPs. b/ Most recent WDI value (2021). key challenge for Chile is to move towards mining were subdued. The copper indus- higher and more inclusive growth. Growth try has performed weakly amid opera- averaged just 2 percent in the six years pre- tional disruptions and lower ore grades. ceding the pandemic. Targeted reforms to On the demand side, private consumption address specific bottlenecks are needed to has bottomed out and started to stabilize in boost productivity growth, which has been recent months, while exports and especial- Chile’s sound macroeconomic policies led declining for decades. This includes reduc- ly investment remained sluggish overall. to a recovery from Covid-induced imbal- ing regulatory barriers, fostering technolo- Labor market performance has yet to return ances, including high deficits and infla- gy adoption, promoting competition, en- to pre-pandemic levels. By December 2023, hancing managerial capabilities, and in- the employment rate stood at 56.6 percent, tion. Fiscal and monetary tightening sta- creasing female labor force participation still below the rate of 58.6 percent registered bilized the economy but stunted 2023 and job quality. Chile is also expected to during the same period in 2019. The unem- growth. Chile aims for faster, greener, leverage the global green transition, with ployment rate remained high at 8.5 percent. and more inclusive growth, and reforms both renewable energy and the plan to ex- Gender gaps in the labor market remain pro- targeting productivity, technology, com- pand lithium production through public- nounced, with women’s labor force partici- private partnerships potentially contribut- pation at 52.6 percent compared to men’s at petition, and human capital development ing to increased growth going forward. 71.4 percent. Similarly, women’s employ- are crucial for achieving this objective. To move towards a more inclusive ment rate was 48.0 percent, while men’s was growth, the government is pursuing an 65.5 percent. Also, women continue to be ambitious social agenda. An initial tax re- more likely to work in the informal sector form proposal aimed at increasing fiscal and earn lower salaries. FIGURE 1 Chile / Exchange rate and copper prices FIGURE 2 Chile / Actual and projected poverty rates and real GDP per capita CLP/USD USD/pound Poverty rate (%) Real GDP per capita (constant million LCU) 1,000 1.0 30 12.0 1.5 900 25 10.0 2.0 800 20 8.0 2.5 700 3.0 15 6.0 3.5 10 4.0 600 4.0 5 2.0 500 4.5 0 0.0 400 5.0 2009 2011 2013 2015 2017 2019 2021 2023 2025 Jan-06 Jul-08 Jan-11 Jul-13 Jan-16 Jul-18 Jan-21 Jul-23 International poverty rate Lower middle-income pov. rate Exchange rate Copper price (rhs, inverse scale) Upper middle-income pov. rate Real GDP pc Source: World Bank based on Central Bank of Chile. Source: World Bank. Notes: see Table 2. MPO 14 Apr 24 Inflation has continued its descent, closing ahead of other economies in the monetary Amid expected modest economic growth 2023 at 3.9 percent y-o-y after a determined policy easing cycle, with a rapidly narrow- and controlled inflation, poverty (US$6.85/ monetary tightening and receding supply ing interest rate differential with the U.S. day, 2017 PPP) is projected to reach 5.0 shocks. A policy easing cycle started in Ju- The real exchange rate is now about 5 per- percent in 2024 and will stay around this ly 2023, with accumulated rate cuts of 400 cent weaker than in 2019 since deprecia- value in the medium term. The Gini coeffi- basis points, bringing the reference rate to tion exceeded the inflation differential cient is projected to remain at 0.43. 7.25 percent in January 2024. with trade partners. In 2021, a wedge ap- The fiscal deficit is expected to narrow to Real public expenditures remained con- peared in the normally close alignment of 2.2 percent of GDP in 2024 as domestic tained in 2023, increasing by 1 percent movement between the peso and copper revenues rise due to rebounding GDP largely due to emergency measures to sup- prices. While their close correlation has re- growth, then to narrow gradually over port vulnerable households affected by El turned more recently, this appears to be the medium term amid a decline in the Niño phenomenon. However, revenues the case at a lower equilibrium rate for the expenditures-to-GDP ratio. These projec- fell by 13 percent due to the slowdown peso (Figure 1). tions do not include potential revenue in- in economic activity and declining mining creases from future tax reforms and as- revenues, leading to a fiscal deficit of 2.4 sume a consolidation path toward medi- percent of GDP. um-term structural deficit targets. The Poverty ($6.85/day per capita 2017 PPP) is Outlook public debt-to-GDP ratio is projected to estimated at 5.2 percent in 2023 and the Gi- be near 42 percent by 2026, still compar- ni inequality coefficient at 0.43. Economic activity is forecast to recover ing favorably with the 50.6 percent me- After reaching a decades-high 9 percent of gradually towards trend GDP growth of dian of “A” rated peers. The current ac- GDP in 2022, the current account deficit 2.0 percent in 2024. Consumption is ex- count deficit would decline toward 3 per- narrowed sharply to 3.6 percent by the end pected to be the main driver of the recov- cent over the medium term. of 2023, as a contraction in nominal im- ery, and exports would contribute posi- Downside risks to the outlook include ports of goods (-16 percent y-o-y in 2023) tively amid the start of new copper min- higher-for-longer interest rates in the U.S., amid the adjustment of domestic demand ing operations and the growing momen- geopolitical tensions, weaker-than-expect- significantly surpassed that of exports (-3.7 tum in lithium production. Investment is ed growth in China, and stronger-than-ex- percent). Foreign direct investment largely projected to remain weak, as suggested pected climate disasters like El Niño and financed the current account deficit. by registries and sentiment surveys. With La Niña. Domestic risks stem mainly from The peso depreciated by 18 percent from inflation on track to return to the 3 per- political gridlock, the inability to pass July 2023 to February 2024. Depreciation cent target this year, further monetary structural reforms in Congress, and poten- pressures are mostly driven by Chile being easing is expected. tial social discontent. TABLE 2 Chile / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 11.7 2.4 0.2 2.0 2.2 2.3 Private consumption 20.8 2.9 -5.2 1.9 2.1 2.2 Government consumption 13.8 4.1 1.6 2.4 2.2 2.2 Gross fixed capital investment 15.7 2.8 -1.1 0.2 2.4 2.4 Exports, goods and services -1.4 1.4 -0.3 2.8 2.6 2.9 Imports, goods and services 31.8 0.9 -12.0 1.2 2.7 2.7 Real GDP growth, at constant factor prices 10.6 2.6 0.2 2.0 2.2 2.3 Agriculture 4.4 0.1 -1.0 2.4 2.3 2.2 Industry 4.6 -0.9 -0.2 2.0 1.9 1.8 Services 14.0 4.4 0.5 2.0 2.3 2.5 Inflation (consumer price index) 4.5 11.6 7.6 3.3 3.0 3.0 Current account balance (% of GDP) -7.3 -9.0 -3.6 -3.6 -3.4 -3.1 Net foreign direct investment inflow (% of GDP) 0.6 2.7 3.4 3.0 3.0 3.0 Fiscal balance (% of GDP) -7.5 1.4 -2.4 -2.2 -2.0 -1.7 Revenues (% of GDP) 26.0 28.1 23.0 23.7 23.6 23.6 Debt (% of GDP) 36.3 38.0 39.8 41.3 41.6 41.8 Primary balance (% of GDP) -6.6 2.4 -1.3 -1.0 -0.7 -0.6 a,b International poverty rate ($2.15 in 2017 PPP) 0.1 0.4 0.4 0.4 0.4 0.4 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.3 0.9 1.0 0.9 0.9 0.9 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 3.5 4.7 5.2 5.0 4.9 4.8 GHG emissions growth (mtCO2e) 13.6 -7.5 0.4 2.6 2.4 2.6 Energy related GHG emissions (% of total) 163.3 167.9 166.7 164.1 161.6 159.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SEDLAC harmonization, using 2022-CASEN. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 15 Apr 24 climate targets could help reduce vulner- abilities and promote a more diversified COLOMBIA Key conditions and economic structure in the long run. These multiple challenges would need to be challenges addressed in a fiscally responsible way, which remains a key precondition for Table 1 2023 Colombia’s solid macroeconomic institu- Colombia to advance its development goals. Population, million 52.1 tional setting, grounded on a rules-based GDP, current US$ billion 363.5 fiscal framework, a flexible exchange rate, GDP per capita, current US$ 6978.7 and a modern inflation-targeting regime, International poverty rate ($2.15) a 6.0 has been the cornerstone of its macroeco- Recent developments a 14.0 nomic stability. Yet, the pace of econom- Lower middle-income poverty rate ($3.65) a 34.8 ic growth has been slowing. Productivity Colombia’s overheated economy deceler- Upper middle-income poverty rate ($6.85) Gini index a 54.8 has not contributed significantly to GDP ated sharply in 2023. After growing a cu- School enrollment, primary (% gross) b 106.5 growth for decades, and despite join- mulative 18.9 percent in 2021-22, GDP ex- b 72.8 ing numerous trade agreements, Colom- panded 0.6 percent (y-o-y) in 2023. The Life expectancy at birth, years bia has not been able to diversify and needed un-winding of stimulus policies Total GHG emissions (mtCO2e) 261.3 expand its exports. Large infrastructure and heightened policy uncertainty affected Source: WDI, Macro Poverty Outlook, and official data. gaps, poor education outcomes, and insti- fixed investment, which fell 8.9 percent (y- a/ Most recent value (2022), 2017 PPPs. b/ Most recent WDI value (2021). tutional shortcomings further hamper the o-y). Private consumption moderated but country’s potential. remained resilient. On the supply side, Colombia is a country of large social and construction, commerce, and manufactur- territorial inequalities. To reduce poverty ing had negative contributions to econom- and promote prosperity across the coun- ic growth, which translated in job losses GDP growth decelerated to 0.6 percent try, it's crucial to increase productivity and in these sectors. Unemployment remained in 2023 as the phase-out of stimulus reinvigorate regional convergence, im- constant at around 10 percent in 2023. measures added to policy uncertainty’s prove the social security system, create After a 2021-22 recovery, labor markets weight on investment. Macroeconomic more efficient and inclusive labor markets, showed limited improvements in 2023, and strengthen the intergovernmental fis- mainly in larger cities, but not reaching imbalances are narrowing, with declin- cal transfer system to enhance the acces- youth, women, and rural areas. Also, the ing inflation and fiscal and external sibility to and quality of public services emergency social program Ingreso Soli- deficits. Poverty reduction is expected to across the country. dario was no longer active in 2023. The moderate, in line with economic activity. Colombia is also particularly vulnerable to poverty rate is estimated to have re- Key risks include persistent inflation the effects of climate change. On the one mained stagnant in 2023 ($6.85/day). La- hand, climate shocks affect livelihoods and bor outcomes and poverty rates continue and economic disruptions due to El assets across the territory, undermining to show wide variations across the terri- Niño, outcomes of the policy reform welfare improvements. On the other, tory and socioeconomic groups. agenda, and fiscal policy slippage Colombia is exposed to the reduction in The deceleration of economic activity also amid tight fiscal space. fossil fuel demand as the world decar- helped narrow the current account deficit, bonizes. Reaching the country’s ambitious from 6.2 to 2.7 percent of GDP between FIGURE 1 Colombia / Indices of real GDP and its components FIGURE 2 Colombia / Actual and projected poverty rates and real GDP per capita Index 2019=100 Poverty rate (%) Real GDP per capita (constant million LCU) 140 60 25.0 130 120 50 20.0 110 40 100 15.0 90 30 80 10.0 20 70 60 5.0 10 50 2018Q1 2018Q4 2019Q3 2020Q2 2021Q1 2021Q4 2022Q3 2023Q2 0 0.0 GDP Consumption 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Gross fixed capital formation Exports International poverty rate Lower middle-income pov. rate Imports Upper middle-income pov. rate Real GDP pc Sources: DANE and World Bank staff calculations. Source: World Bank. Notes: see Table 2. MPO 16 Apr 24 2022 and 2023, as the good performance of also declined but remain high among its reduction in fuel subsidies and lower exports contrasted with a collapse of im- regional peers. capital expenditures. ports, affected by weak consumption and Amid moderate economic growth in 2024, the fall in investment. Primary payments limited progress is expected in poverty re- also fell, and remittance inflows reached duction. Moreover, while inflation de- an all-time high, mitigating pressures on Outlook clined, higher prices are still impacting real the external deficit. FDI inflows increased incomes and food security, and climate marked by oil and mining activities, while The economy is projected to expand 1.3 per- shocks may affect households, particularly portfolio investment posted net outflows. cent in 2024 and slightly above the 3 percent in regions like Caribe and Pacífico. Promot- Inflation declined from a peak of 13.3 per- potential growth rate in the following years ing more dynamic labor markets and adjust- cent (y-o-y) in March 2023 to 8.3 per- until the negative output gap closes. Private ing the social protection system, for exam- cent in January 2024, easing pressures consumption, solid export growth, and a ple, by expanding coverage and adaptive- on households’ rising costs of living. The steady rise in private investment are expect- ness to shocks, would help build resilience. Central Bank kept the monetary policy ed to support the pick-up, as inflation and Risks to the economic growth outlook in- rate constant through most of 2023 and interest rates recede, and policy uncertainty clude higher or more persistent inflation, reduced it cautiously by 25 bps in two abates. The current account deficit is pro- exacerbated by the effects of El Niño on consecutive Board meetings, to 12.75 per- jected to expand marginally in 2024, as food and utility prices, or by continued cent in January 2024. Inflation expecta- economic activity accelerates and imports currency volatility from tighter external fi- tions are falling but remain above the rebound, and to stabilize at 3 percent of nancial conditions or domestic develop- 2-4 percent inflation target range for 2024. GDP by 2026, with solid exports -especial- ments. Rising violence could undermine The Colombian peso reversed losses from ly in services- and moderate growth in im- stability and growth. Uncertainty around 2022, benefiting from high-interest rates, ports and primary payments. the reform agenda could also increase fis- global financial liquidity, and a reduction The fiscal deficit of the general govern- cal pressures and lead to delays in private- in policy uncertainty. ment is projected to increase to 3.5 percent sector investment. This is mitigated by the The fiscal deficit of the general govern- of GDP due to the unwinding of cyclical fact that the government has reiterated its ment fell sharply from 6.5 in 2022 to 2.5 factors that contributed to the large drop in commitment to the fiscal rule, complied percent of GDP in 2023, thanks to yields 2023 and higher expenditure at the central with since its inception in 2011, including from the 2022 tax reform, a reduction in level. The government committed to com- by the current administration. Finally, the fuel subsidies, low budget execution lev- plying with the structural fiscal rule. In the impact of climate change on GDP growth, els, and extraordinary returns to pension face of uncertain revenues, adjustments to external and fiscal sustainability, and the funds. The peso appreciation and fiscal meet targets could come through low exe- most vulnerable is a continuous source of deficit reduction brought the debt-to-GDP cution. The fiscal deficit is expected to nar- concern, as Colombia is very exposed to ratio down to 60.1 percent. EMBIG spreads row going forward, through the continued physical and transition risks. TABLE 2 Colombia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 10.8 7.3 0.6 1.3 3.2 3.1 Private consumption 14.7 10.7 1.1 0.6 2.7 2.5 Government consumption 9.8 0.8 0.9 0.6 0.8 0.8 Gross fixed capital investment 16.7 11.5 -8.9 1.0 5.5 5.2 Exports, goods and services 14.6 12.3 3.1 3.2 5.2 5.5 Imports, goods and services 26.7 23.6 -14.7 9.5 2.9 3.0 Real GDP growth, at constant factor prices 10.3 6.4 0.6 1.3 3.2 3.1 Agriculture 4.4 -0.8 1.8 3.1 3.5 3.4 Industry 8.1 6.9 -1.9 1.6 3.3 3.0 Services 11.9 7.0 1.5 1.0 3.2 3.1 Inflation (consumer price index) 3.5 10.2 11.7 6.4 3.8 2.8 Current account balance (% of GDP) -5.6 -6.2 -2.7 -3.1 -3.0 -3.0 Fiscal balance (% of GDP) -7.1 -6.5 -2.5 -3.5 -3.0 -3.0 Revenues (% of GDP) 26.6 27.6 31.8 30.1 29.5 28.9 Debt (% of GDP) 65.7 64.6 60.1 60.4 59.3 58.7 Primary balance (% of GDP) -3.7 -2.1 1.4 0.9 1.1 0.9 a,b International poverty rate ($2.15 in 2017 PPP) 7.3 6.0 6.7 6.7 6.7 6.7 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 16.4 14.0 14.8 14.7 14.7 14.7 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 38.8 34.8 35.1 35.1 35.1 35.0 GHG emissions growth (mtCO2e) -0.5 -0.9 -0.9 -0.6 -0.1 -0.1 Energy related GHG emissions (% of total) 24.5 23.0 22.8 22.7 22.5 22.3 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SEDLAC harmonization, using 2022-GEIH. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 17 Apr 24 the adjustment. Public debt increased from 56 percent in 2019 to 68 percent of GDP COSTA RICA Key conditions and in 2021, affected by fiscal pressures asso- ciated with the pandemic. Increased rev- challenges enues, expenditure control measures, and strong growth enabled the country to post Table 1 2023 Costa Rica's income per capita has doubled the first primary surplus in a decade in Population, million 5.2 in the past two decades, thanks to an out- 2022. The public debt ratio is declining but GDP, current US$ billion 81.9 ward-oriented growth model, investments remains relatively high. GDP per capita, current US$ 15713.5 in human capital, and good governance. Addressing Costa Rica's twin challenges of a 0.9 International poverty rate ($2.15) The country upgraded and diversified its inclusivity and fiscal management is crucial. a 3.3 exports, making it less vulnerable to exter- Growth would need to become more inclu- Lower middle-income poverty rate ($3.65) a 14.1 nal shocks. It also strengthened its green sive across the labor force and territory, and Upper middle-income poverty rate ($6.85) Gini index a 47.2 trademark through sustainable natural re- fiscal policies should continue to support School enrollment, primary (% gross) b 108.9 sources management and reforestation. creditworthiness. Improving revenue mo- b 77.0 However, integration between the export bilization and spending efficiency, especial- Life expectancy at birth, years and domestic economies remains weak, ly in social and infrastructure sectors, is es- Total GHG emissions (mtCO2e) 7.4 leading to income and territorial dispari- sential to reduce poverty and inequality. Source: WDI, Macro Poverty Outlook, and official data. ties. Despite accessible healthcare and ed- a/ Most recent value (2022), 2017 PPPs. b/ Most recent WDI value (2021). ucation, monetary poverty reduction has been limited (only 2.6p.p. between 2010 and 2019), and inequality has persisted, Recent developments Growth accelerated to 5.1 percent in 2023 with the Gini index remaining above 47 since 2010. Poverty rates are particularly After moderating to 4.6 percent in 2022, supported by strong domestic and exter- high among vulnerable groups such as growth surpassed expectations, reaching nal demand. Adequate monetary policy Afro-descendants, Indigenous popula- 5.1 percent in 2023, bolstered by robust do- and lower international prices helped dis- tions, and migrants. The global pandemic mestic and external demand. Inflationary sipate inflationary pressures, allowing for deepened these challenges, with the pover- pressures subsided in the first half of 2023. ty rate (measured by the US$6.85/day 2017 Inflation rapidly decreased from its peak of a less restrictive monetary stance since PPP) increasing from 13.7 percent in 2019 12 percent in August 2022 to within the tar- Q12023. This, combined with strong to 19.9 percent in 2020. As labor market geted range by March 2023, subsequently FDI, boosted private consumption and in- conditions improved and real household transitioning to deflation during the second vestment. Poverty (US$6.85 poverty line) per-capita labor income recovered, pover- half of the year. This shift allowed the Cen- declined to 12.7 percent, but inequality ty declined below pre-pandemic levels. tral Bank to progressively reduce the policy Additionally, fiscal challenges arose be- rate starting in March, which in turn stimu- remained high. Fiscal consolidation is en- tween 2008 and 2018 due to increased lated private consumption and investment. hancing market access and should contin- spending without a rise in revenues. A The current account deficit narrowed in ue promoting spending efficiency, while 2018 reform was implemented to stabi- 2023, driven by a larger trade surplus, and protecting the most vulnerable. lize the fiscal situation, but the pandem- was financed by robust investment in- ic and commodity price shocks delayed flows. Exports, particularly of medical FIGURE 1 Costa Rica / Economic activity growth (seasonally FIGURE 2 Costa Rica / Actual and projected poverty rates adjusted) and real GDP per capita Growth y/y (percent) Poverty rate (%) Real GDP per capita (constant million LCU) 36 25 10.0 IMAE - Economic Activity Index 30 IMAE - Definitive Regime 9.0 IMAE - Special Regime 20 8.0 24 7.0 18 15 6.0 5.0 12 10 4.0 6 3.0 5 2.0 0 1.0 -6 0 0.0 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 -12 International poverty rate Lower middle-income pov. rate Feb-20 Aug-20 Feb-21 Aug-21 Feb-22 Aug-22 Feb-23 Aug-23 Upper middle-income pov. rate Real GDP pc Sources: Central Bank of Costa Rica and World Bank staff calculations. Source: World Bank. Notes: see Table 2. Note: Special Regime includes Free Trade Zone, Active Improvement and Refund of Rights regimes. Definitive Regime focus on domestic use or consumption. MPO 18 Apr 24 equipment, along with tourism and busi- Fiscal consolidation is expected to persist ness services, saw notable expansion, out- throughout the forecast period, under- stripping the recovery in imports. Costa Outlook pinned by a fiscal rule that constrains Rica maintained its position as one of the spending growth, contributing to a reduc- world's leading recipients of Greenfield Amid global uncertainty and a slowdown tion in the debt-to-GDP ratio to below 60 FDI relative to GDP. Foreign reserves re- in key trading partners, growth is project- percent by 2025. Recent strides in debt bounded to cover over five months of ed to moderate to 3.7 percent during the management are likely to reduce Costa Ri- goods and services imports, while the cur- forecast period. While external demand is ca's financing costs, while tax administra- rency appreciated by approximately 12 anticipated to pick up in 2026, domestic tion efforts should reinforce revenue mo- percent in 2023. demand is expected to temper as monetary bilization. Announced reforms, including The fiscal deficit widened to 3.3 percent policy normalizes and fiscal consolidation cuts in tax expenditures, adjustments to in- of GDP in 2023 from 2.5 percent in 2023, advances, aiding in closing the output gap. come tax, and a decrease in the fragmen- pressured by a record-high interest bill of The current account deficit is projected to tation of social programs, are essential to 4.8 percent of GDP and a smaller prima- widen marginally to 2.7 percent of GDP, bolster fiscal consolidation and establish ry surplus of 1.6 percent of GDP. The lat- reflecting a deceleration in external de- safeguards against shocks while protecting ter resulted from the phase out of large mand and stabilization of terms of trade. the impoverished. one-off revenues associated with an in- Nonetheless, the deficit is anticipated to be This economic outlook is subject to down- stitutional restructuring, which more than fully covered by healthy FDI inflows. side risks. Costa Rica's high susceptibility offset spending controls. The debt-to-GDP As inflation stabilizes and labor market to external shocks, such as global inflation- ratio continued to decline reaching 61.1 conditions continue to improve, particu- ary pressures, dampened global growth, percent. Solid fiscal performance prompt- larly within the services sector, the pover- and tightening financial conditions, could ed Fitch, S&P, and Moody’s to upgrade ty rate is projected to further decline to pose challenges. Climate vulnerabilities, Costa Rica's sovereign credit rating to BB/ 11.3 percent by 2026, marking the lowest exacerbated by phenomena like El Niño, BB-/B1. The country also successfully is- level in over a decade. Targeting and compound these uncertainties and could sued US$3 billion in Eurobonds in two efficiency enhancements in social assis- disproportionately impact the poor. Addi- tranches (March and November). Costa tance programs, especially for historically tionally, recent surges in migration and Rica's progress on climate issues facilitat- marginalized groups and those living be- perceived criminality could increase ex- ed the inclusion of its sovereign bonds in low the poverty line, could further reduce penditure demands, potentially impeding JP Morgan's sustainability index. poverty and vulnerability. the pace of fiscal consolidation. TABLE 2 Costa Rica / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 7.9 4.6 5.1 3.9 3.7 3.7 Private consumption 8.3 3.4 5.4 3.8 3.4 3.4 Government consumption 1.7 2.4 0.1 0.4 0.7 0.8 Gross fixed capital investment 7.8 1.5 8.6 5.0 5.9 6.2 Exports, goods and services 15.9 13.2 10.5 8.1 7.6 7.6 Imports, goods and services 19.2 6.0 5.6 7.9 7.9 8.1 Real GDP growth, at constant factor prices 7.2 4.4 5.1 3.7 3.7 3.8 Agriculture 0.3 -2.3 3.5 2.1 2.1 2.0 Industry 13.5 2.1 8.3 2.6 2.7 2.9 Services 5.9 5.6 4.2 4.1 4.2 4.2 Inflation (consumer price index) 1.7 8.3 0.5 1.9 3.0 3.0 Current account balance (% of GDP) -3.2 -3.7 -1.0 -2.3 -2.4 -2.7 Net foreign direct investment inflow (% of GDP) 4.8 4.4 4.4 4.2 4.3 4.4 Fiscal balance (% of GDP) -5.0 -2.5 -3.3 -2.8 -2.2 -1.6 Revenues (% of GDP) 15.7 16.4 15.4 15.5 15.8 16.0 Debt (% of GDP) 67.6 63.0 61.1 60.1 59.0 57.8 Primary balance (% of GDP) -0.3 2.1 1.6 2.0 2.2 2.4 a,b International poverty rate ($2.15 in 2017 PPP) 1.2 0.9 0.9 0.8 0.8 0.8 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 3.7 3.3 3.0 2.9 2.9 2.8 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 14.5 14.1 12.7 12.0 11.9 11.3 GHG emissions growth (mtCO2e) 0.7 3.2 1.1 2.2 2.1 2.3 Energy related GHG emissions (% of total) 97.4 96.8 95.2 93.2 91.3 89.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SEDLAC harmonization, using 2022-ENAHO. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 19 Apr 24 the poorest (e.g., subsidies on diesel and gasoline, increased VAT-free units in do- DOMINICA Key conditions and mestic electricity bills), led to high fiscal deficits and pushed public debt over 100 challenges percent of GDP. Recurrent expenditures are now returning to pre-pandemic levels al- Table 1 2023 Dominica is highly vulnerable to climate though further effort will be needed to meet Population, million 0.1 change, natural disasters, and other exter- Dominica’s primary balance target of 2 per- GDP, current US$ billion 0.7 nal shocks. The economy has recovered cent of GDP by FY26 as per their fiscal rule. GDP per capita, current US$ 9015.8 from the pandemic and continues to per- The government is implementing a highly a 92.5 School enrollment, primary (% gross) form well, largely supported by infrastruc- ambitious public investment pipeline, a 72.8 ture investments and a rebound in largely financed by CBI revenues, including Life expectancy at birth, years Total GHG emissions (mtCO2e) 0.2 tourism. Increases in global commodity a new international airport, geothermal en- Source: WDI, Macro Poverty Outlook, and official data. prices pushed inflation to historical highs ergy investments, and a significant housing a/ Most recent WDI value (2021). in 2022 and 2023. Although inflation is ex- program. While CBI revenues have re- pected to moderate in 2024, higher price mained buoyant, they can be volatile and re- levels of basic goods continue to impact liance on such revenues raises financing Dominica, a small island developing household welfare, particularly the poor. risk. Dominica’s vulnerability to hurri- The latest round of the CARICOM/WFP on- canes and climate change means that the state (SIDS), faces economic challenges line COVID-19 Food Security and Liveli- authorities will have to increasingly focus and climate vulnerability. Post-pandem- hoods Impact Survey in the Caribbean (May on building resilience based on fiscal ic recovery is strong, driven by tourism, 2023) indicates that about half of respon- buffers, climate resilient investment, and infrastructure, and agriculture, though dents faced livelihood disruptions in the expanding public and private insurance high inflation is affecting the poor dis- thirty days prior to the survey, largely due protection and social assistance within a to unaffordable livelihood inputs. While context of limited fiscal space. Geothermal proportionately. Food insecurity persists. there has been considerable improvement energy development and the new airport Public debt soared due to pandemic sup- given the strength in tourism and stronger bode well for future growth prospects and port and inflation mitigation efforts. In- growth, 29 percent of the respondents re- will help address Dominica’s small island vestments in geothermal energy and an ported a job loss or a reduction in labor state competitiveness challenges. income in the last six months, and this international airport will significantly is actually an improvement compared to boost future growth and stimulate pri- the earlier round. Although the survey vate sector development. Reliance on provides helpful insights, the data is not Recent developments volatile Citizen-by-Investment (CBI) representative and should be interpreted with caution. Growth continued its rebound in 2023 at revenues poses risks. Strengthening fis- The fiscal deficit widened significantly dur- 4.9 percent (5.6 percent in 2022), due to cal policy is needed to safeguard debt ing the pandemic, but it fell considerably in the relaxation of domestic COVID-19 con- sustainability amid external shocks, in- 2023. Pandemic-related support, increased tainment measures and improving tourist cluding those related to climate change. infrastructure spending, and fiscal mea- arrivals. Growth is estimated to remain sures to mitigate the impact of inflation on strong in 2024 as tourism returns to 2019 FIGURE 1 Dominica / Real GDP growth and fiscal balance FIGURE 2 Dominica / Public debt Percent, percent of GDP Percent of GDP 30 120 25 20 100 15 10 80 5 0 60 -5 40 -10 -15 Public Debt 20 -20 Public External Debt 2012 2014 2016 2018 2020 2022 2024 2026 Overall Fiscal Balance (percent of GDP) 0 Real GDP growth at constant factor prices 2012 2014 2016 2018 2020 2022 2024 2026 Sources: Government of Dominica and World Bank staff calculations. Sources: Government of Dominica and World Bank staff calculations. MPO 20 Apr 24 levels and as it is further supported by debt remains high at 101 percent of GDP at public investment projects will require public investment. Inflation was 5.5 per- the end-2023 after peaking at 109 percent careful management and implementation. cent in 2023 after peaking at 7.8 percent in in 2021. Approximately 90 percent of Do- Growth and lower inflation should con- 2022, driven largely by fuel prices, and to a minica’s external debt is owed to multilat- tribute to a reduction in poverty rates in lesser extent by food prices. Inflation is ex- eral and bilateral creditors on concession- the medium term. There is an urgent need pected to decline to 2.3 percent in 2024. al terms. Nonetheless, with a 22 percent for updated poverty data, as well as other Inflation continued to affect households’ debt service to revenue ratio in 2023, pub- key indicators including labor market sta- purchasing power and access to food over lic debt obligations run the risk of crowd- tistics, to monitor households’ wellbeing 2023, given Dominica’s dependence on im- ing out other spending priorities. A combi- and inform the design of public policy. ported food products. According to the nation of sound fiscal policy and sustained The fiscal deficit is expected to narrow as CARICOM/WFP survey, nearly all respon- growth is needed to put public debt levels exceptional spending measures continue dents reported an increase in prices of on a firm downward trajectory. to be wound down, current spending is food, gas, transport, and electricity in the The current account deficit (CAD) at 21.6 reduced and rationalized, and fiscal rules three months prior. Similarly, farmers and percent of GDP in 2023 reflects Domini- metrics are adhered to, including primary fishermen continue to report increased in- ca’s SIDS status and is financed primarily balances of 2.0 percent of GDP by 2026, put costs. Food insecurity appears to have by CBI revenues, grants, and FDI. Re- though further measures will be needed leveled out in the first half of 2023, al- serves are adequate at 5.0 months of im- to achieve this target. The CAD is forecast though it remains widespread. A consider- port coverage. Financial sector stability to narrow as tourism receipts increase, ably large number of respondents indicat- and related risks are limited as banks are though high food and fuel prices will ed that they reduced essential non-food well capitalized. Recapitalization of cred- maintain some pressure on the CAD. Fi- expenditures (e.g., education and health) it unions is progressing, though balance nancial sector risks will continue to require and spent savings to meet immediate sheets remain strained following recent monitoring given implicit contingent fiscal food needs, which could compromise shocks. Private sector credit remains con- liabilities arising from the large credit their well-being in the long term and strained as most recent bank lending has union and insurance sectors. These sectors, make them less prepared for future been to the public sector. while improving, have yet to fully recover shocks. Low-income households, women, from Hurricane Maria, and the impacts of and younger respondents appear to be the COVID-19 pandemic also continue to experiencing greater challenges across be felt on balance sheets. most metrics of well-being and are at risk Outlook Forecasts are subject to considerable of falling further behind. downside risk given uncertain food and The fiscal position has improved, register- Short- to medium-term GDP growth con- fuel prices, the economic impact of global ing an overall deficit of 4.2 percent in FY23 tinues to be driven by tourism, aided by geo-political developments, and continued following a 6.4 percent deficit in FY22. This a robust public investment program fi- reliance on volatile CBI revenues. Risks modest improvement was the result of re- nanced through CBI revenues. Geother- from natural disasters and the impact of duced current expenditure in a post-COVID mal developments and a new internation- climate change remain significant. Risks al- environment, reduced public investment, al airport should boost structural and po- so arise from the financial sector and fiscal and a robust growth environment. Public tential growth. Nonetheless, these large and public debt vulnerabilities. TABLE 2 Dominica / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 6.9 5.6 4.9 4.6 4.2 3.0 Real GDP growth, at constant factor prices 6.8 6.8 4.9 4.6 4.2 3.0 Agriculture 23.4 -0.7 2.7 2.6 2.1 1.9 Industry 5.0 1.1 3.3 3.2 3.0 2.6 Services 4.5 9.4 5.6 5.2 4.7 3.3 Inflation (consumer price index) 1.5 7.8 5.5 2.3 2.0 2.0 Current account balance (% of GDP) -32.9 -26.7 -21.6 -18.0 -15.3 -12.6 a Fiscal balance (% of GDP) -10.0 -6.4 -4.2 -3.1 -3.2 -2.0 Revenues (% of GDP) 58.6 53.1 48.1 47.2 46.1 43.8 a Debt (% of GDP) 109.2 105.1 101.1 97.4 96.1 92.6 a Primary balance (% of GDP) -7.7 -3.6 -1.0 0.0 -0.5 0.6 GHG emissions growth (mtCO2e) -7.5 -1.9 -0.3 0.1 0.2 0.1 Energy related GHG emissions (% of total) 71.9 72.3 73.1 73.9 74.6 75.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Fiscal balances are reported in fiscal years (July 1st -June 30th). MPO 21 Apr 24 will require ambitious structural reforms, such as (i) improving education; (ii) mak- DOMINICAN Key conditions and ing markets more competitive; (iii) re- vamping the innovation strategy and challenges REPUBLIC adopting climate-friendly technologies; (iv) improving public spending and ser- The Dominican Republic (DR) has been vice delivery; and (v) rebuilding fiscal one of the fastest growing economies in buffers to deal better with external Table 1 2023 Latin America and the Caribbean, with an shocks, including through additional re- Population, million 10.8 average growth rate of 5.4 percent from source mobilization. These changes GDP, current US$ billion 120.9 2005 to 2022. Prudent monetary and fis- should go hand in hand with improve- GDP per capita, current US$ 11198.9 cal policies helped macroeconomic stabil- ments of labor market regulations and so- International poverty rate ($2.15) a 0.8 ity and social progress. During this time, cial protection systems. a 4.0 the number of people living in poverty Lower middle-income poverty rate ($3.65) a – earning less than US$6.85 per day - Upper middle-income poverty rate ($6.85) 21.5 dropped significantly from 57 to 22 per- Gini index a b 37.0 cent. Foreign direct investment (FDI) in- Recent developments School enrollment, primary (% gross) 100.2 flows were about 4 percent of GDP each b 72.6 Life expectancy at birth, years year. However, exports declined from 28 After a strong rebound in 2022, GDP Total GHG emissions (mtCO2e) 38.5 to 22 percent of GDP. growth decelerated to 2.4 percent in 2023. Source: WDI, Macro Poverty Outlook, and official data. Recent exogenous shocks, including the The construction sector experienced a sig- a/ Most recent value (2022), 2017 PPPs. pandemic, rising commodity prices, and nificant slowdown in the first half of the b/ WDI for School enrollment (2022); Life expectancy (2021). severe floods, strained the country’s fi- year, as borrowing costs and input prices nances. Public debt remains above pre- increased. However, the implementation pandemic levels, and new expenditure of monetary liquidity facilities, represent- needs have arisen, with the interest bill ing nearly 2 percent of GDP, in conjunc- The Dominican economy is poised for a consuming three percent of GDP in 2022. tion with a resurgence in public invest- rebound in 2024, with an expected As a result, public investment fell from ment mitigated the slowdown. This al- growth rate of 5.1 percent, fueled by the 3.9 to 2.6 percent of GDP between 2005 lowed the economy to witness an acceler- delayed impacts of monetary easing and and 2022. To create space for more public ation in the second half of the year, with increased public investment. Unemploy- investment, the country would need to a 4.7 percent year-on-year growth in De- improve domestic resource mobilization cember 2023. Service sectors, such as hos- ment has decreased, and labor incomes and spending efficiency. Rebuilding its pitality and health care, saw expansions have improved, reducing poverty to below fiscal buffers will also enable the country of 10.7 percent, and 10 percent, respec- pre-pandemic levels. To maintain its fast to respond better to unexpected events, tively. This performance helped offset the growth, the country would benefit from like natural disasters. To keep growing construction’s sector early sluggishness. and make sure poverty continues to de- The economy witnessed the generation of productivity-enhancing reforms and cli- cline, it is important to increase produc- around 148 thousand new jobs in 2023, mate change adaptation, while continu- tivity. According to the Country Econom- translating into a year-over-year growth ing to implement prudent fiscal policy. ic Memorandum published in 2023, this of 3.2 percent, significantly surpassing the FIGURE 1 Dominican Republic / Index of economic FIGURE 2 Dominican Republic / Actual and projected activity, IMAE poverty rates and real GDP per capita Annual percent growth Poverty rate (%) Real GDP per capita (constant LCU) 16 50 350000 y-o-y growth rate 14 45 12-month over preceding 12 months 300000 40 annualized growth rate 12 35 250000 10 30 200000 25 8 150000 20 6 15 100000 10 4 50000 5 2 0 0 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 0 International poverty rate Lower middle-income pov. rate Dec-21 Apr-22 Aug-22 Dec-22 Apr-23 Aug-23 Dec-23 Upper middle-income pov. rate Real GDP pc Source: World Bank staff calculations based on Central Bank data. Source: World Bank. Notes: see Table 2. MPO 22 Apr 24 pre-pandemic numbers. This employment The fiscal deficit expanded to 3.3 per- 2025-27, growth is forecasted to stabilize recovery was driven by a 5.6 percent (y-o- cent of GDP in 2023, up from 3.2 per- at around 5 percent, contributing to fur- y) increase in formal employment, partic- cent in 2022. Total revenue surged 12.2 ther reductions in poverty rates (US$6.85 ularly among women, who saw the cre- percent, bolstered by enhancements in per day, 2017 PPPs). ation of 65,142 new jobs. tax administration and extraordinary A gradual fiscal consolidation is expected The current account deficit (CAD) is pro- revenue from advanced corporate in- over the medium term, driven by the on- jected to have contracted to approximately come tax payments. Expenditures es- going Electricity Pact reforms, the phase- 3.6 percent of GDP in 2023, a reduction calated by 11.1 percent year-over-year, out of untargeted subsidies, and spending from the 5.6 percent recorded in 2022. The propelled by a substantial 21.0 percent efficiency measures (e.g., procurement, so- nation welcomed 10.3 million visitors, increase in public investment and a 19.9 cial programs consolidation). Consequent- with 78 percent being new arrivals. Rev- percent rise in interest payments. ly, the public debt-to-GDP ratio is expect- enue generated from these visits climbed ed to decrease progressively, maintaining to US$9.8 billion, marking a 16.9 percent a level below 57 percent post-2026. increase from 2022. Remittance grew by 3.1 The macroeconomic outlook faces exter- percent in 2023, signaling a stabilization Outlook nal and domestic risks. A deceleration at levels exceeding those prior to the pan- in the US economy that outpaces expec- demic. The CAD was fully financed by ro- In 2024, economic growth is anticipated tations could adversely affect tourist ar- bust FDI and long-term capital inflows. to accelerate to 5.1 percent, buoyed by the rivals and exports. Weather-related Inflation declined throughout the year, delayed effects of monetary policy easing events, such as El Niño, could also se- reaching 3.6 percent y-o-y in December and augmented public investment. Infla- verely affect agriculture and tourism and 2023, within the central band (4 percent+-1 tionary pressures are expected to contin- disproportionately affect the poor. Cli- percent). The Central Bank reduced its pol- ue easing, allowing the central bank to mate-induced GDP deviations from base- icy rate from 8.5 percent to 7.0 percent in cut interest rates further. Over the medi- line could reach up to 16.7 percent of November 2023. In 2023, the poverty rate um term, robust consumption and invest- GDP by 2050. The high exposure to ex- at US$6.85 per day (2017 PPP) fell to 19 ment are expected to underpin growth, ternal shocks and the country’s limited fi- percent, below the 2019 pre-pandemic lev- bolstered by the execution of structural nancial safeguards against such risks pose el of 20 percent. The principal factor con- reforms in key sectors such as energy, significant fiscal and financial risks. tributing to this reduction in poverty was water, and public-private partnerships, as Therefore, fortifying resilience is impera- the growth in labor incomes, supplement- well as initiatives aimed at improving ed- tive to sustain economic growth and en- ed by public transfers. ucation and attracting FDI. By the years sure it is more inclusive. TABLE 2 Dominican Republic / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 12.3 4.9 2.4 5.1 5.0 5.0 Private consumption 6.6 5.1 2.9 5.0 5.1 5.2 Government consumption 0.1 3.9 2.8 2.7 2.5 2.2 Gross fixed capital investment 22.1 4.0 -2.1 7.0 5.6 5.0 Exports, goods and services 36.2 13.7 2.2 4.0 4.5 4.6 Imports, goods and services 25.7 14.4 -3.8 4.4 4.1 3.8 Real GDP growth, at constant factor prices 11.5 4.7 2.4 5.1 5.0 5.0 Agriculture 2.6 5.0 3.9 3.6 3.4 3.2 Industry 16.5 1.3 -0.1 4.5 4.0 4.0 Services 10.0 6.5 3.5 5.5 5.7 5.7 Inflation (consumer price index) 8.2 8.8 4.8 4.4 4.2 4.0 Current account balance (% of GDP) -2.8 -5.6 -3.8 -3.6 -3.4 -3.2 Net foreign direct investment inflow (% of GDP) 3.4 3.5 3.6 3.7 3.7 3.7 a Fiscal balance (% of GDP) -2.9 -3.2 -3.3 -3.1 -3.0 -2.9 Revenues (% of GDP) 15.6 15.3 15.8 15.4 15.2 15.1 b Debt (% of GDP) 62.6 58.6 59.1 58.4 57.8 57.2 a Primary balance (% of GDP) 0.2 -0.4 -0.1 0.5 0.7 0.8 c,d International poverty rate ($2.15 in 2017 PPP) 0.9 0.8 0.6 0.6 0.4 0.4 c,d Lower middle-income poverty rate ($3.65 in 2017 PPP) 4.3 4.0 3.5 3.2 3.0 2.9 c,d Upper middle-income poverty rate ($6.85 in 2017 PPP) 23.2 21.5 19.4 17.7 17.2 16.9 GHG emissions growth (mtCO2e) 9.9 -0.5 -0.9 1.5 1.3 1.2 Energy related GHG emissions (% of total) 62.6 61.4 60.1 59.7 59.4 59.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Fiscal balances are shown for the non-financial public sector (i. e. excluding central bank quasi-fiscal balances). b/ Consolidated public sector debt. c/ Calculations based on SEDLAC harmonization, using 2022-ECNFT-Q03. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. d/ Projections using microsimulation methodology. MPO 23 Apr 24 cut current expenditures, particularly within State-Owned Enterprises (SOEs), ECUADOR Key conditions and among other initiatives. A referendum on policies encompassing security, part-time challenges employment, asset forfeiture, and other is- sues is scheduled for April. Table 1 2023 Ecuador is grappling with an unprece- Amid declining domestic oil output and a 18.0 Population, million dented security crisis. A surge in violence long-term global decarbonization trends, a 116.6 GDP, current US$ billion associated with drug trafficking activities private investment is needed to ignite new GDP per capita, current US$ 6476.6 led to the declaration of a state of internal growth sources in sectors with competitive b 3.2 International poverty rate ($2.15) armed conflict and the army to intervene advantages, such as mining and agricul- b 9.5 in January. At the same time, the country ture. Improving barriers to private sector Lower middle-income poverty rate ($3.65) b 29.9 faces an electricity generation deficit amid development by strengthening the insol- Upper middle-income poverty rate ($6.85) Gini index b 45.5 historically low investment aggravated by vency framework, reducing market inter- School enrollment, primary (% gross) c 97.5 climatic events, which led to electricity ra- vention, allowing for competition, further c 73.7 tioning in 2023, disrupting economic activ- expanding trade integration, and improv- Life expectancy at birth, years ity. Against this backdrop, snap elections ing labor regulation will be critical, partic- Total GHG emissions (mtCO2e) 100.2 yielded a fragmented National Assembly ularly in the context of dollarization. Source: WDI, Macro Poverty Outlook, and official data. and a minority government with an a/ Most recent value (2022). b/ Most recent value (2022), 2017 PPPs. 18-month term. The new government that c/ WDI for School enrollment (2022); Life expectancy took office in November faces significant (2021). liquidity constraints and a large financing Recent developments gap, which is set to increase in the com- ing years in the absence of structural fis- Real GDP grew by an estimated 2.8 per- Ecuador faces an unprecedented security cal reforms. Ecuador remains excluded cent in 2023, thanks to a good performance crisis and significant fiscal challenges due from international capital markets, with in the first half of the year, and despite a to escalating security costs, diminished oil the EMBI spread around 1300 basis marked slowdown in the second half. Oil points. Adding to the fiscal and growth disruptions, the El Niño effect, heightened revenues, surging costs of fuel and electrici- challenges, a referendum held in August political uncertainty, and insecurity affect- ty imports and high interest payments. 2023 will lead to a shutdown of oil extrac- ed private consumption and investment in Growth has slowed, also due to the effects of tion in the Yasuni National Park by the H2, slightly increasing poverty by the end El Niño climate phenomenon and electrici- end of August 2024, affecting one-tenth of of 2023. Annual inflation decreased from a ty shortages. To unlock sustainable growth, national oil production. peak of 4.2 percent in June 2022 to 1.4 per- The Noboa administration has taken im- cent in December 2023, one of the lowest in Ecuador needs to address fiscal imbalances, portant steps to address the challenging the region, amid weak domestic demand. improve its security situation, and remove fiscal situation. Besides implementing Labor market conditions deteriorated, barriers to private sector development to measures to address short-term liquidity with the unemployment rate reaching 3.4 unleash investment, formal job creation, constraints, the government passed a bill percent in December 2023 (3.2 percent as to increase the VAT rate. Moreover, plans of December 2022), still mainly impacting and export diversification. are underway to reduce fuel subsidies and women at a rate of 4.2 percent (compared FIGURE 1 Ecuador / Emerging Market Bond Index (EMBI) FIGURE 2 Ecuador / Actual and projected poverty rates and real GDP per capita Percent Poverty rate (%) Real GDP per capita (constant LCU) 70 50 7000 45 60 6000 40 35 5000 50 30 4000 40 25 3000 20 30 15 2000 10 20 1000 5 10 0 0 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 0 International poverty rate Lower middle-income pov. rate Jan-19 Jan-20 Dec-20 Dec-21 Jan-23 Jan-24 Upper middle-income pov. rate Real GDP pc Source: JP Morgan Chase. Source: World Bank. Notes: see Table 2. MPO 24 Apr 24 to 2.8 percent for men). Job quality also The current account surplus narrowed maintain poverty measured at $6.85PPP at deteriorated as underemployment in rural from 1.8 percent of GDP in 2022 to an the same level in 2024. areas reached 22.3 percent (compared to estimated 1.4 percent in 2023 amid de- While fiscal accounts will be pressured in 18.6 percent in 2022) and 20.6 percent in clining oil prices. With limited external 2024 by the economic slowdown, declining urban areas, explained by droughts, secu- financing and foreign investment, finan- oil revenues, and growing security expen- rity concerns, and energy rationing. De- cial account outflows surpassed the cur- ditures, recently approved measures are spite a labor market deterioration, low in- rent account surplus, and international expected to bolster revenues. Considering flation helped maintain poverty – mea- reserves almost halved from US$8.5 bil- these measures, the fiscal deficit is expect- sured at $6.85PPP, the upper-middle-in- lion in December 2022 (3.3 months of im- ed to narrow to 2 percent of GDP. The NF- come poverty line – constant at about 30 ports) to US$4.5 billion in December 2023 PS faces around $7bn in financing needs in percent. However, incomes for the poorest (2.3 months of imports). 2024, which are expected to grow further declined, especially in rural areas, result- in 2025 and 2026. ing in a slight increase in extreme poverty The current account surplus is projected to measured at $2.15PPP. narrow further to almost balance in 2024, The fiscal deficit is expected to have Outlook driven by lower oil production and exports, widened to 3.5 percent of GDP in 2023. In- while non-oil export growth continues to terest payments and a higher fuel and elec- Growth is projected to decline to 0.7 per- soften amid subdued investment prospects. tricity import bill increased spending last cent in 2024 due to the security crisis, polit- Declining current account surpluses, low year. Revenues declined amid lower eco- ical uncertainty, declining oil production, foreign investment, and rising external debt nomic growth and oil revenues. Given liq- and the impacts of El Niño and La Niña. service would continue to put downward uidity shortages, arrears to the private sec- Government arrears to the private sector pressure on international reserves. tor surpassed 2020 levels. To address liq- are also expected to affect negatively eco- In addition to its vulnerability to lower oil uidity constraints, the government turned nomic growth. A reduction in political un- prices and tighter-for-longer global finan- to short-term measures such as reprofiling certainty following the 2025 elections and cial conditions, Ecuador is exposed to nat- of Central Bank debt, as well as a tax an improvement in the security, energy, ural hazards, including stronger-than-ex- amnesty and advance income tax pay- and fiscal outlook after measures taken by pected El Niño and La Niña that directly ments starting in 2024. The Assembly also the new administration are expected to affect household incomes in rural areas. approved temporary additional contribu- help the economy start a gradual recovery Domestically, risks stem from an inability tions to banks’ and firms‘ profits and in- in 2025, although medium-term growth to solve the fiscal crisis, a disorderly end- creased capital outflow tax rates in Febru- would remain sluggish overall. Weak eco- ing of oil exploitation in the Yasuni, social ary. In addition, the VAT is set to increase nomic growth and structural labor market unrest, political instability, and a further from 12 to 15 percent as of April. conditions, especially for women, will worsening of the security crisis. TABLE 2 Ecuador / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 9.8 6.2 2.8 0.7 1.7 2.0 Private consumption 11.3 7.4 1.3 1.1 2.3 2.4 Government consumption 0.0 1.8 1.9 0.2 1.5 1.7 Gross fixed capital investment 13.2 8.5 0.2 0.2 2.7 1.2 Exports, goods and services 9.4 7.3 2.3 -1.6 -0.9 2.9 Imports, goods and services 21.5 10.5 -4.0 -1.5 1.0 2.9 Real GDP growth, at constant factor prices 9.5 6.0 2.8 0.7 1.7 2.0 Agriculture 9.0 2.3 2.0 1.9 2.4 2.5 Industry 12.5 4.9 0.9 -4.9 -6.0 1.0 Services 8.2 7.1 3.8 3.0 4.8 2.4 Inflation (consumer price index) 0.1 3.5 2.2 1.9 1.8 1.8 Current account balance (% of GDP) 2.9 1.8 1.4 0.1 -0.1 0.0 Net foreign direct investment inflow (% of GDP) 0.6 0.7 0.4 0.3 0.3 0.3 Fiscal balance (% of GDP) -1.7 0.0 -3.5 -2.0 -1.7 -1.5 Revenues (% of GDP) 34.5 36.4 34.5 35.4 35.7 35.7 Debt (% of GDP) 61.5 56.9 57.8 58.3 59.2 59.0 Primary balance (% of GDP) -0.3 1.6 -1.5 0.1 0.4 0.6 a,b International poverty rate ($2.15 in 2017 PPP) 3.6 3.2 3.8 3.8 3.8 3.9 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 10.9 9.5 10.3 10.4 10.3 10.3 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 31.7 29.9 29.6 29.7 29.6 29.9 GHG emissions growth (mtCO2e) 2.2 1.8 1.7 0.7 1.1 1.6 Energy related GHG emissions (% of total) 34.9 35.6 36.3 36.3 36.7 37.0 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SEDLAC harmonization, using 2022-ENEMDU. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 25 Apr 24 productivity growth, attract FDI, and generate jobs for the underprivileged. EL SALVADOR Key conditions and The latest PISA figures from the OECD reveal that improvements in education challenges system are needed. However, persistent fiscal imbalances, coupled with limited Table 1 2023 El Salvador has maintained an average access to external borrowing and a sub- Population, million 6.4 growth rate of 2 percent between 2000 and stantial current account deficit, present GDP, current US$ billion 35.5 2019. Its economic performance is closely significant hurdles that may undermine GDP per capita, current US$ 5580.8 linked to the US economy, particularly potential growth. a 3.4 International poverty rate ($2.15) through high remittance rates (26 percent a 8.6 relative to GDP) and trade flows. Poverty Lower middle-income poverty rate ($3.65) a 27.5 and vulnerability are high. Slightly more Upper middle-income poverty rate ($6.85) Gini index a 38.8 than one-fourth of the population live on Recent developments School enrollment, primary (% gross) b 88.7 less than US$6.85/day, while two-thirds live b 70.7 on less than US$14/day. Inequality, in con- El Salvador's growth is projected to reach Life expectancy at birth, years trast, is among the lowest in the region. 2.7 percent in 2023. Throughout the year, Total GHG emissions (mtCO2e) 12.7 However, El Salvador faces persistent struc- economic activity gained momentum, with Source: WDI, Macro Poverty Outlook, and official data. tural challenges, including low productivi- year-on-year growth accelerating from 0.5 a/ Most recent value (2022), 2017 PPPs. b/ WDI for School enrollment (2019); Life expectancy ty and human capital deficiencies originat- percent in the first quarter to 3.6 percent (2021). ing from issues such as malnutrition and in- by the third quarter. This upswing was fu- adequate schooling levels. Since 2022, sub- eled by public investment and consump- stantial progress has been made in reducing tion, primarily driven by remittances, gang-related violence, with some positive alongside a rebound in exports. The poor social and economic outcomes. segment of the population, especially the Despite being one of the largest recipients extremely poor, rely less on remittances El Salvador is projected to experience an of remittances globally, El Salvador runs than more affluent households. This limits average growth of 2.5 percent from 2024 a chronic current account deficit, stem- the potential impact of remittances on to 2026, influenced by a US slowdown af- ming from energy price sensitivity and poverty reduction. Following a peak of 7.2 fecting remittances and tourism. In 2024, underperforming exports. The ability to percent in 2022, inflation moderated to an finance this deficit through capital in- average of 4.1 percent in 2023. inflation is expected to fall to 2.1 percent, flows, is constrained, further straining re- The fiscal deficit widened to 4.2 percent though poverty and vulnerability rates serves. While the banking sector remains of GDP in 2023, up from 2.7 percent in will likely stay constant, highlighting the profitable with low levels of non-perform- 2022. Government revenues increased 6.8 need for more and better jobs. The current ing loans, reductions in reserve require- percent, driven by higher current taxes account deficit is expected to narrow, but ments to accommodate government short- stemming from improved economic per- term debt raise concerns. formance, alongside rising social security the fiscal position remains precarious due contributions (13.8 percent). However, Addressing these challenges will require to uncertain financing options. structural reforms, particularly in education government spending outweighed it, ex- and infrastructure, to stimulate long-term panding 10 percent, driven by both public FIGURE 1 El Salvador / Consumer price index inflation and FIGURE 2 El Salvador / Actual and projected poverty rates core inflation, 12 months moving average inflation and real GDP per capita Percentage Poverty rate (%) Real GDP per capita (constant LCU) 8 60 5000 Consumer price index 7 4500 Core index 50 4000 6 3500 40 5 3000 30 2500 4 2000 20 3 1500 1000 2 10 500 1 0 0 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 0 International poverty rate Lower middle-income pov. rate Jan-22 May-22 Sep-22 Jan-23 May-23 Sep-23 Upper middle-income pov. rate Real GDP pc Source: World Bank staff calculations. Source: World Bank. Notes: see Table 2. MPO 26 Apr 24 investment (69 percent) and consumption propane gas), hiring freezes, and the mod- (9 percent). Nonetheless, social spending eration of automatic wage adjustments. continues to be among the lowest in Latin Outlook Debt service will remain below 2022 lev- America. El Salvador’s public debt reached els due to restructuring short-term debt 76 percent of GDP in 2023. El Salvador is projected to grow on aver- into long-term instruments, lowering The 2023 pension reform has temporar- age at 2.5 percent between 2024-2026, ap- rollover risk. Moreover, revenues are ex- ily improved the fiscal accounts by re- proaching its potential growth. This decel- pected to remain strong helped by en- ducing interest payments until 2027. eration stems from a slowdown in US ac- hanced tax collection efforts. However, it may lead to future fiscal tivity, likely dampening remittances, and El Salvador's fiscal position remains delicate pressures due to increases in the min- tourism. Inflation is projected to continue for a dollarized economy, facing liquidity imum pension payout. Furthermore, its downward trajectory, reaching 2.1 per- challenges and limited financing options. while the reform has improved liquidity, cent in 2024. However, poverty and vul- Medium-termprospectscontinuetoberisky El Salvador still confronts major financ- nerability rates are anticipated to remain without a credible medium-term fiscal con- ing challenges, and financing options are almost constant until 2026, indicating that solidation plan. Furthermore, the interest limited to pensions, banks and official most of the population are not reaping the savings resulting from the pension reform creditors, as the government’s access to benefits of overall growth. This under- will turn into a cost after 2027. However, a international markets is closed. scores the necessity for targeted policies, sustained decrease in sovereign spreads and The current account deficit, which widened and the creation of higher-wage jobs. in the public debt to GDP ratio could facili- in 2022, is expected to close 2023 at 2.5 per- The current account deficit is expected to tate El Salvador's return to international cent, driven by declines in international narrow in 2024 on the back of improved markets relaxing liquidity constraints. fuel and food prices. Remittances contin- net exports, despite the projected slow- Downside risks to the outlook include a ue to play a pivotal role in El Salvador's down in remittances. This deficit is expect- slowdown in global economic activity, a external position, stabilizing at 26 percent ed to be partly financed by official lending shift in immigration policy in the US, and an of GDP. Tourism has benefited from im- and FDI. Nonetheless, the pressure on in- overreliance on domestic financing that provements in security, and arrivals have ternational reserves is likely to persist could crowd out the private sector. More- increased from 2.4 to 3.4 million between without additional capital inflows and/or over, a more severe El Niño could disrupt 2022 and 2023. Foreign Direct Investment short-term fiscal consolidation. supply chains and increase logistics expens- rose by 1.1 percentage points, reaching The primary fiscal deficit is forecasted to de- es, affecting the health of vulnerable house- 1.7 percent of the GDP in 2023, partially crease in 2024, primarily due to reduced holds. While security measures are expected financing the deficit. Reserves remain low public spending associated with the election to boost consumption and investment, their at 9 percent of GDP. cycle, the phase-out of subsidies (except for long-term sustainability remains uncertain. TABLE 2 El Salvador / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 11.2 2.6 2.7 2.5 2.5 2.5 Private consumption 16.1 2.6 1.8 1.7 1.7 1.7 Government consumption 7.2 -1.4 4.4 1.3 1.2 1.1 Gross fixed capital investment 25.1 2.6 6.4 5.1 3.6 3.6 Exports, goods and services 29.4 10.2 3.5 1.6 2.4 2.5 Imports, goods and services 28.9 1.2 3.9 1.5 1.4 1.4 Real GDP growth, at constant factor prices 10.2 3.1 2.7 2.5 2.5 2.5 Agriculture 4.0 0.6 -1.9 -1.8 -1.1 -1.7 Industry 10.5 3.6 1.5 2.9 2.5 2.5 Services 10.7 3.2 3.5 2.7 2.8 2.8 Inflation (consumer price index) 3.5 7.2 4.1 2.1 1.9 1.7 Current account balance (% of GDP) -4.3 -6.6 -2.5 -2.3 -2.0 -2.0 Net foreign direct investment inflow (% of GDP) 1.0 -0.3 1.7 1.7 1.8 2.0 a Fiscal balance (% of GDP) -4.8 -2.7 -4.4 -2.7 -2.6 -2.9 Revenues (% of GDP) 23.8 24.2 24.3 24.3 24.3 24.3 b Debt (% of GDP) 82.7 78.0 75.7 74.3 73.0 72.2 a Primary balance (% of GDP) -0.4 1.9 -0.5 1.1 1.3 1.0 c,d International poverty rate ($2.15 in 2017 PPP) 3.6 3.4 3.4 3.3 3.2 3.2 c,d Lower middle-income poverty rate ($3.65 in 2017 PPP) 8.7 8.6 8.7 8.6 8.5 8.5 c,d Upper middle-income poverty rate ($6.85 in 2017 PPP) 28.4 27.5 27.6 27.2 27.0 27.0 GHG emissions growth (mtCO2e) 5.4 -0.5 -0.6 0.1 0.2 0.3 Energy related GHG emissions (% of total) 51.2 50.8 50.4 50.3 50.1 49.9 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Fiscal and Primary Balance correspond to the non-financial public sector. b/ Debt is total public debt. c/ Calculations based on SEDLAC harmonization, using 2022-EHPM. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. d/ Projections using microsimulation methodology. MPO 27 Apr 24 A strong commitment to adhering to fiscal rules and additional structural reforms are GRENADA Key conditions and needed to sustain inclusive growth, reduce poverty and inequality, enhance the effec- challenges tiveness of social protection programs, and strengthen climate resilience. Targeted Table 1 2023 Grenada has outperformed its eastern policies to boost job creation and skill de- Population, million 0.1 Caribbean peers in economic perfor- velopment for women and youth are also GDP, current US$ billion 1.3 mance, achieving an average annual required. The Government has committed GDP per capita, current US$ 10503.8 growth of 3.3 percent between 2015 and to remaining on track with the new fiscal a 0.3 International poverty rate ($2.15) 2019, while keeping public debt relatively rules in 2024 and plans to further improve a 1.3 low and reducing poverty. Growth has accountability and fiscal transparency. Lower middle-income poverty rate ($3.65) a 13.8 been driven by construction and tourism, Upper middle-income poverty rate ($6.85) Gini index a 43.8 supported by structural reforms initiated School enrollment, primary (% gross) b 83.4 in 2015. The 2015 Fiscal Responsibility Life expectancy at birth, years b 74.9 Act was replaced by the 2023 Fiscal Re- Recent developments silience Act (FRA) with the aim to further Total GHG emissions (mtCO2e) 2.5 enhance Grenada’s fiscal policy frame- Economic activity improved in 2023, lead- Source: WDI, Macro Poverty Outlook, and official data. work by simplifying rules, broadening the ing to gains in poverty reduction. Growth a/ Most recent value (2018), 2017 PPPs. b/ Most recent WDI value (2021). definition of public debt, and strengthen- is estimated to have reached 4.8 percent ing the role of the medium-term fiscal in 2023 as visitor arrivals, public and strategy. State-Owned Enterprises (SOEs) private construction activity, and the re- play a vital role in the country’s economic turn of students to St. George’s Universi- stability and growth, as they are involved ty (SGU) contributed significantly to the Grenada is expected to have returned to in various critical sectors. The Eastern economy. Inflation rose to 2.7 percent by its strong pre-COVID growth in 2023, Caribbean Currency Union’s fixed ex- end-2023, mostly driven by increases in thanks to tourism and construction. The change rate anchors low inflation and price food and fuel prices. The recent under- country has improved its fiscal position stability. Grenada’s financial sector re- performance in the agriculture sector was mains stable and liquid. largely due to unfavorable weather condi- and continues to reduce its public debt. However, vulnerabilities remain. Grena- tions and the high cost of fertilizers. The It has also continued with the imple- da's economy relies heavily on tourism, a unemployment rate dropped to 12.0 per- mentation of pro-growth reforms, clos- sector significantly affected by the glob- cent in 2023-Q2. However, it continues to ing infrastructure gaps, and building al business cycle and natural disasters. be higher among women (14.6 percent) climate resilience. Complying with es- Inequality, measured by the Gini coeffi- and the youth (36.2 percent). Poverty cient, has hovered around 0.44 since 2018, ($6.85 a day in 2017 PPP) is estimated to tablished fiscal rules will be critical for which is high by international standards. have declined to 13.9 percent in 2023, re- Grenada to sustain inclusive growth Gender disparities in access to economic maining slightly above pre-pandemic lev- and make continued progress in poverty opportunities persist, and youth unem- els (13.8 percent in 2018). and inequality reduction. ployment stands significantly above the The current account deficit is estimated to national average. have widened in 2023, as the increased FIGURE 1 Grenada / Key macroeconomic variables FIGURE 2 Grenada / Actual and projected poverty rates and real GDP per capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 9 78 20 25000 8 76 18 7 74 16 20000 72 14 6 70 12 15000 5 68 10 4 66 8 10000 3 64 6 2 62 4 5000 1 60 2 0 58 0 0 2021 2021 2022 e 2023 e 2024f 2025f 2018 2020 2022 2024 2026 Debt to GDP ratio (rhs) Primary balance International poverty rate Lower middle-income pov. rate GDP growth rate Upper middle-income pov. rate Real GDP pc Source: World Bank, Macroeconomics and Fiscal Management Global Practice. Source: World Bank. Notes: see Table 2. Notes: e= estimate; f = forecast. MPO 28 Apr 24 import bill exceeded the recovery in GDP in 2024 to 4.7 percent in 2026, reducing tourism-driven exports due to a larger capital spending funds. A new public sector volume of goods required for construc- Outlook pension scheme should become operational tion projects. Remittances are estimated in 2024 and may require Government contri- to have slowed from the pandemic peak. Real output growth is projected to moderate butions going forward. On the revenue side, However, it is unlikely to have impacted to 4.1 percent in 2024, with an average of 3.7 a strong recovery in tax revenue collection poverty, as the wealthiest households ac- percent over the medium term. This reflects and additional revenue enhancement mea- count for most of the remittances re- a slower pace of expansion in tourism and sures are expected to offset increased spend- ceived. Citizenship-by-Investment (CBI) construction, as public investments are ex- ing and maintain the primary balance above inflows were larger than expected in 2023 pected to scale back due to the binding new the new FRA target of 1.5 percent of GDP and supported both public and private fiscal rules. Nonetheless, private and public over the medium term. Public debt is pro- investment. Foreign Direct Investment investments are expected to continue to sup- jected to remain on a downward path, sup- (FDI) helped finance the external deficit port construction. The implementation of ported by output growth, fiscal surplus, and as did loans from multilateral and bi- structural reforms is also expected to posi- declining debt service payments, and reach lateral development partners. Estimated tively affect the output. Inflationary pres- 71.8 percent of GDP by 2026 as additional imputed reserves increased by 9 percent sures are expected to ease over the medium primary surplus is assumed to be directed from 2021 to 2022. term, from the 2022 peak. An overall infla- towards the National Transformation Fund. The fiscal surplus further improved in tion rate of 2.0 percent is forecast from 2024 Externally, the risks are mainly on the 2023, owing to increased CBI non-tax rev- onwards. Amid moderate economic downside and associated with the uncer- enues (EC$382.9 million) and buoyant eco- growth and controlled inflation, poverty tainty around rising geopolitical tensions, nomic activity. Total revenue rose to 36.8 ($6.85 a day in 2017 PPP) is projected to the global economic slowdown, and persis- percent of GDP in 2023. These improve- fall below pre-pandemic levels in 2024 and tent inflationary pressures. Domestically, ments more than compensated for the el- continue to decline in 2025 and 2026. both upside and downside risks exist. On evated capital expenditures. Public sector The authorities are advancing an ambitious the upside, a faster uptake in the tourism debt increased to 75.5 percent of GDP in fiscal reform agenda. On the expenditure sector and/or construction projects could 2023, up from 64.1 percent of GDP in 2022. side, they aim to raise wages moderately spur a new wave of growth. On the down- This increase reflects the recently intro- within the new FRA ceiling of 13 percent of side, the country’s vulnerabilities to natural duced FRA, which broadens the debt cov- GDP. CBI inflows, which spiked in 2023-24, disasters, health issues, and other shocks erage by including the debt of all SOEs. are projected to taper off from 7.9 percent of could negatively impact future growth. TABLE 2 Grenada / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 4.7 7.3 4.8 4.1 3.7 3.2 Real GDP growth, at constant factor prices 5.2 6.2 4.8 4.1 3.7 3.2 Agriculture 15.7 -16.8 -2.1 1.4 3.1 3.1 Industry 15.3 17.4 4.3 4.5 2.0 2.0 Services 2.0 5.5 5.5 4.2 4.2 3.5 Inflation (consumer price index) 1.9 2.9 2.7 2.0 2.0 2.0 Current account balance (% of GDP) -14.5 -11.0 -14.3 -16.9 -13.5 -12.6 Fiscal balance (% of GDP) 0.3 0.9 6.3 0.2 0.2 0.3 Revenues (% of GDP) 31.6 32.7 36.8 34.8 30.2 30.2 a Debt (% of GDP) 71.4 64.1 75.5 74.2 72.6 71.8 Primary balance (% of GDP) 2.1 2.5 7.7 1.8 1.5 1.5 b,c International poverty rate ($2.15 in 2017 PPP) 0.3 0.3 0.3 0.3 0.1 0.1 b,c Lower middle-income poverty rate ($3.65 in 2017 PPP) 2.3 1.3 1.3 1.3 1.1 1.1 b,c Upper middle-income poverty rate ($6.85 in 2017 PPP) 17.3 15.6 13.9 13.5 12.9 11.9 GHG emissions growth (mtCO2e) 1.6 2.1 1.6 1.5 1.4 1.4 Energy related GHG emissions (% of total) 13.3 13.4 13.6 13.6 13.6 13.6 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ The debt coverage over the period 2023-2026 was expanded to include the non-guaranteed debt of all SOEs, aligned with the new FRA. b/ Calculations based on CONLAC harmonization, using 2018-SLCHB. Actual data: 2018. Nowcast: 2019-2023. Forecasts are from 2024 to 2026. c/ Projection using neutral distribution (2018) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 29 Apr 24 by high informality, with over 70 per- cent of the employed population work- GUATEMALA Key conditions and ing informally, and this figure rises to nearly 75 percent among women, partic- challenges ularly in the agricultural sector. Addi- tionally, in 2022, 56.9 percent of house- Table 1 2023 Guatemala is recognized for its stable holds lacked access to at least one basic Population, million 17.6 macroeconomic environment. Over the service, such as clean water, sanitation, GDP, current US$ billion 100.5 past five years, the average GDP growth electricity, or waste collection. GDP per capita, current US$ 5710.0 was 3.6 percent, reserves stayed at com- Guatemala would benefit from reforms a 9.5 International poverty rate ($2.15) fortable levels and public debt remained at that enhance productivity and foster in- a 25.9 28 percent of GDP, despite the economic clusive growth. This requires improved Lower middle-income poverty rate ($3.65) a 55.4 disruptions caused by COVID-19 and the infrastructure, education, business envi- Upper middle-income poverty rate ($6.85) Gini index a 48.3 food and fuel crisis. ronment, and expanded social protection School enrollment, primary (% gross) b 103.9 Despite this stability, underlying chal- programs, which in turn entails more ef- b 69.2 lenges persist, such as stagnant produc- fective and increased spending. Histor- Life expectancy at birth, years tivity growth and insufficient human cap- ically, Guatemala has struggled to im- Total GHG emissions (mtCO2e) 40.9 ital development. The Human Capital In- plement revenue-increasing reforms. The Source: WDI, Macro Poverty Outlook, and official data. dex has shown little improvement, mov- new government, which assumed office a/ Most recent value (2014), 2017 PPPs. b/ WDI for School enrollment (2022); Life expectancy ing from 0.44 in 2010 to 0.46 in 2020. in January, faces significant challenges in (2021). Human development outcomes are par- passing reforms through Congress, even ticularly low among Indigenous Peoples, for less contentious issues. Afro-descendants, and residents of re- mote areas. Economic growth has primar- Guatemala possesses the macroeconomic ily been driven by capital accumulation stability required to foster inclusive and labor force expansion, with the latter Recent developments expected to increase until 2044. However, growth yet struggles to implement re- labor force participation remains relative- In 2023, GDP growth decelerated from 4.1 forms to quicken growth and alleviate ly low at 60 percent in 2022, especially percent in the previous year to 3.5 percent, poverty and inequality. GDP growth among women. despite stronger growth in the US and in- Poverty and inequality have seen mini- creased remittances. The presidential elec- forecast ranges from 3 to 3.5 percent in mal change over the last decade. Over tions and the ensuing complex transition the medium term, with poverty and in- half of the population lives below the dampened business confidence, which has equality projected to stay among the poverty line ($6.85, 2017 PPP), one of remained below 50 since mid-2023. highest in the region. Significant risks the highest poverty rates in Central Inflation saw a substantial decline, drop- to this outlook include natural disas- America. Multidimensional poverty is ping from 9.7 percent in January to 4.2 predominantly rural, with 46 percent of percent by December 2023, aided by re- ters, political instability, and volatility duced food and energy prices and a the population living in these areas, ac- in commodity prices. counting for 73 percent of the impover- tighter monetary policy that maintained ished. The labor market is characterized the interest rate at 5 percent since March. FIGURE 1 Guatemala / Economic Activity Index (EAI) and FIGURE 2 Guatemala / Actual and projected poverty rates Index of Confidence of Economic Activity (ICEA) and real GDP per capita Percent (y-o-y) Confidence Index (>50 = positive) Poverty rate (%) Real GDP per capita (constant LCU) 10 140 70 40000 8 120 60 35000 6 30000 100 50 25000 4 40 80 20000 2 30 60 15000 0 20 10000 40 -2 10 5000 Economic Activity Index (lhs) 20 0 0 -4 Economic Activity Index: Industry (lhs) 2014 2016 2018 2020 2022 2024 2026 Index of Confidence of Economic Activity (rhs) -6 0 International poverty rate Lower middle-income pov. rate Jan '22 Jun '22 Nov '22 Apr '23 Sep '23 Upper middle-income pov. rate Real GDP pc Source: Banco de Guatemala. Source: World Bank. Notes: see Table 2. MPO 30 Apr 24 Despite rising real interest rates through- ceiling, while projected revenues for 2024 out the year, credit to the private sector are higher than those budgeted for 2023, grew by 15 percent in 2023. The banking Outlook which would yield a strong fiscal consol- sector has remained robust and prof- idation in 2024. The government has set itable, with a non-performing loan ratio Economic activity slowed in 2023 and is a higher tax revenue target and intends of 1.8 percent. expected to continue into 2024. The de- to request an increase in the expendi- The current account surplus is estimated layed effects of higher interest rates and ture ceiling by 13 million LCU. Given the to have grown to nearly 4 percent of low confidence will be felt, and El Niño president's lack of a congressional major- GDP, attributed to a reduced trade deficit, will reduce agricultural yields in 2024. ity, it is not clear that Congress will ap- improved terms of trade, and higher re- GDP growth is projected to moderate to 3 prove the increased expenditures in full. mittance inflows. Fiscal accounts showed percent in 2024 due to lower consumption In lack of better guidance, the forecast as- a modest improvement from 2022 to 2023, and government investment. A gradual in- sumes a nominal expenditure increase of with the budget deficit narrowing from crease is expected in 2025, as interest rates 4 million LCU in 2024 compared to 2023, 1.7 to 1.4 percent of GDP due to a mod- are reduced, El Niño's impact lessens, and which would yield a deficit of 0.5 percent erate revenue increase and stable expen- business confidence recovers. of GDP in 2024. ditures. Public debt remained low at 28.3 Inflation is predicted to rise in the first half of The main downside risks to the economic percent of GDP. 2024, driven by food prices affected by El outlook include natural disasters, rising Lower inflation, remittance growth, and Niño-induced droughts. External accounts commodity prices, and political deadlock. moderate growth have contributed to are expected to remain in surplus, though at Increases in commodity prices due to cli- poverty reduction, with estimates show- a reduced level, due to an increased trade mate events like La Niña or geopolitical ing a decrease to 55 percent (U$6.85 deficit and slower remittance growth. conflicts in the Middle East can lead to in- 2017 PPP poverty line) in 2023, from 56 Poverty rates (U$6.85 2017 PPP poverty line) flation spikes. Disruptions in global trade in 2022. However, the labor market's are projected to stay close to 54.1 percent in routes from such conflicts and droughts in limited dynamism and persistent high 2024, as the sluggish agricultural sector and the Panama Canal could increase freight informality, have kept poverty rates inflationary pressures persist, and poverty costs and reduce supply, triggering infla- above pre-pandemic levels (54 percent using the U$2.15 line (2017 PPP) is anticipat- tion. The growing political impasse among in 2019). Inequality is also estimated ed to remain near 9.6 percent. all branches of government could prevent to have remained higher than pre-pan- The fiscal outlook remains uncertain. The Guatemala from enacting reforms and im- demic levels (49 in 2023 vs. 48.5 in courts have suspended the approved 2024 plementing policies to tackle poverty and 2019), reflecting entrenched social and budget, and the government is currently low productivity, potentially undermining geographical disparities. operating under the 2023 expenditure its macroeconomic stability. TABLE 2 Guatemala / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 8.0 4.1 3.5 3.0 3.5 3.5 Private consumption 8.5 4.2 4.0 3.8 3.7 3.7 Government consumption 4.9 7.2 5.0 3.0 3.5 3.5 Gross fixed capital investment 19.8 3.5 6.0 4.8 4.1 4.1 Exports, goods and services 10.3 7.0 -1.0 2.7 3.5 3.5 Imports, goods and services 19.5 4.4 3.7 5.6 4.2 4.2 Real GDP growth, at constant factor prices 7.8 4.4 3.5 3.0 3.5 3.5 Agriculture 4.3 2.6 3.0 0.5 3.5 3.0 Industry 8.6 4.6 2.5 2.0 3.3 3.3 Services 8.1 4.6 4.0 3.7 3.6 3.6 Inflation (consumer price index) 4.3 6.9 6.3 4.8 3.7 3.5 Current account balance (% of GDP) 2.2 1.3 3.8 3.4 3.3 3.3 Net foreign direct investment inflow (% of GDP) 3.8 1.3 1.8 1.9 1.9 2.0 Fiscal balance (% of GDP) -1.2 -1.7 -1.4 -0.5 -0.5 -0.4 Revenues (% of GDP) 12.4 12.7 12.9 13.5 13.7 14.0 Debt (% of GDP) 30.8 29.2 28.3 27.4 26.4 25.6 Primary balance (% of GDP) 0.6 0.0 0.3 1.2 1.3 1.3 a,b International poverty rate ($2.15 in 2017 PPP) 10.8 10.4 9.9 9.6 9.0 8.4 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 28.1 27.4 26.2 25.5 24.0 23.1 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 57.0 56.0 55.1 54.1 52.6 52.4 GHG emissions growth (mtCO2e) 4.8 3.4 2.7 2.6 2.7 2.7 Energy related GHG emissions (% of total) 51.2 51.9 52.3 52.7 53.1 53.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SEDLAC harmonization, using 2014-ENCOVI. Actual data: 2014. Nowcast: 2015-2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 31 Apr 24 NRF Act 2021. As of December 2023, the closing balance in the NRF was US$1.97 GUYANA Key conditions and billion. The country is also advancing initiatives to sell carbon credits from challenges forest conservation, which represent an additional source of fiscal revenues and Table 1 2023 Guyana is a small state with abundant nat- will be partly employed to sustainably Population, million 0.8 ural resources, including significant oil manage its forests. GDP, current US$ billion 16.8 and gas (O&G) reserves and extensive for- Rising budget resources present both op- GDP per capita, current US$ 20626.2 est cover. With a large part of its territorial portunities and risks for Guyana. They a 90.5 School enrollment, primary (% gross) waters still unexplored, Guyana’s gross oil have allowed the government to respond a 65.7 resources are conservatively estimated at to the global pandemic and inflation while Life expectancy at birth, years Total GHG emissions (mtCO2e) 30.3 over 11 billion barrels, making it one of the increasing spending to address infrastruc- Source: WDI, Macro Poverty Outlook, and official data. world’s highest levels per capita. The start ture gaps and human development needs. a/ WDI for School enrollment (2020); Life expectancy of oil production in 2019 led to an unprece- However, the extraordinary pace of scaling (2021). dented rate of economic growth, resulting up public spending heightens the risks of in the country being reclassified as high-in- spending inefficiencies, and oil revenues come as of July 2023. raise concerns of potential “Dutch Dis- Guyana's new-found resource wealth con- ease” effects. It is therefore critical to con- trasts with the overall needs of the popula- tain the pace of fiscal expansion and to ef- tion. Poverty and social exclusion, includ- fectively manage O&G revenues to sup- Guyana emerged as one of the world's ing limited access to basic services, have port growth in the non-oil economy. fastest-growing economies following the traditionally been particularly severe in Sound management of the O&G sector ne- development of its oil and gas (O&G) sec- Guyana’s hinterland and among Amerindi- cessitates strengthening governance and tor. In light of the substantial oil rev- ans. The lack of recent data on poverty and proactive public financial management enues, the government is implementing equity inhibits an assessment of progress practices while boosting transparency and in fighting poverty and fostering social in- accountability to avoid increased social po- an ambitious investment program to clusion since the start of oil production. larization. There has also been a recent es- structurally transform the non-oil econo- The development of the O&G sector has calation of tension between Guyana and my and address its development needs. allowed a notable scale-up of investments Venezuela over the border controversy be- Lack of recent data on poverty and equity in infrastructure to support growth in tween the two countries. other sectors. With over 70 percent of the limits the effectiveness and monitoring of working-age population residing in rur- public policies to reduce poverty in these al areas, agriculture, forestry, and fish- transformational times for Guyana. ing remain important for job creation and Recent developments Sound management of O&G resources poverty reduction. will be critical for inclusive growth. Guyana’s oil revenues are held at the Nat- Guyana’s economy continued its strong ural Resource Fund (NRF), a sovereign expansion in 2023, with real GDP growing wealth fund outside of the economy, with by 33.0 percent. The third oil field started clear withdrawal rules governed by the production in November 2023, allowing oil FIGURE 1 Guyana / Oil production, real oil, and real non-oil FIGURE 2 Guyana / Fiscal balances and Natural Resource GDP Fund (NRF) transfers under NRF Act 2021 and 2024 revisions Real GDP (G$B, 2012 prices) Oil production (thousand barrels per day) Percent of GDP Percent of non-oil GDP 8,000 1,000 10 0 NRF transfers (NRF Act 2021) 7,000 NRF transfers (NRF rev 2024) Fiscal balance (NRF Act 2021, rhs) 800 8 -5 6,000 Fiscal balance (NRF rev 2024, rhs) 5,000 600 6 -10 4,000 3,000 400 4 -15 2,000 200 1,000 2 -20 0 0 2021 2022 2023 e 2024 f 2025 f 2026 f 0 -25 Oil GDP Non-Oil GDP Oil Production (rhs) 2021 2022 2023 e 2024 f 2025 f 2026 f Sources: Government of Guyana and World Bank staff calculations. Sources: Government of Guyana and World Bank. Notes: e=estimate, f=forecast. Notes: e=estimate, f=forecast. NRF rev 2024 projections assume yearly withdrawal of maximum amounts allowed by the revised rules in the Fiscal Enactments Amendment Bill 2024. MPO 32 Apr 24 production to reach 143 million barrels in debt. Fiscal policy focused on increasing expected to be moderate in 2024 but will 2023, leading to a 45.9 percent growth in capital investment to support growth in remain elevated in the medium term due oil GDP. The non-oil economy grew by the non-oil economy, while providing to increased government consumption and 11.7 percent, driven mainly by expansion relief to citizens from the adverse im- higher input costs. Poverty reduction will in the construction and services sectors, pact of the pandemic and rising prices. depend on efforts to boost the purchasing supported by strong public investment. Relief efforts included direct and indi- power of poor and vulnerable households, Agricultural output grew by 7 percent, rect income support, with adjustments as well as on translating the performance with notable growth in the sugar-growing to the income tax threshold and a re- of the non-oil economy into jobs. sector due to improved yields. duction in the fuel excise tax. The pub- The fiscal deficit, not yet reflecting the NRF The urban consumer price index increased lic debt-to-GDP ratio increased to 28.5 revisions, is projected to average 20.9 per- by an average of 2.8 percent in 2023, re- percent of GDP in 2023 as a result of cent of non-oil GDP (or 8.1 percent of total flecting a sharp slowdown in inflation new external and domestic borrowing. GDP) as the increase in capital spending compared to the 6.4 percent recorded in The current account recorded a surplus outstrips NRF transfers. Public debt as a 2022. Inflation slowed across all categories, of 11.8 percent of GDP in 2023, notably percentage of GDP is expected to be on a but price increases in food were relatively smaller than in 2022 due to the impor- moderate downward trend as the econo- high, averaging 5.8 percent in 2023, com- tation of the third oil platform. my continues to expand. Increased exports pared to housing, transportation, and oth- of oil, gold, and bauxite will result in a cur- er categories. Higher food costs dispropor- rent account surplus of around 23.9 per- tionately affect the poor and vulnerable, cent of GDP over the medium term, also ir- who spend a larger portion of their budget Outlook regularly affected by the importation of oil on food, and can jeopardize food security. production platforms. The nominal exchange rate has remained Guyana's economy is expected to continue The extractive sector is the dominant stable since 2019 through periodic inter- its strong expansion over the medium source of growth and fiscal revenues for vention, and the real effective exchange term, with rising oil production driving Guyana. This increases the country’s sus- rate was also stable in 2023, after a slight the overall growth path. The three produc- ceptibility to oil-related shocks and re- appreciation in 2022. tion platforms currently in operation are quires proactive management. Prudent The fiscal deficit was 14.6 percent of non- expected to reach over 550,000 bpd as the NRF management and strengthening the oil GDP in 2023, despite significant trans- third and newest platform reaches full ca- medium-term fiscal framework are critical fers from the NRF. Transfers from the pacity. The fourth oil development project for preventing the economy from over- NRF approximated US$1 billion (6.0 per- is expected to start operation in 2025, fur- heating. Oil production has environmental cent of GDP) in 2023, up from US$608 ther increasing production capacity and consequences that must be carefully con- million in 2022 (4.1 percent of GDP), in GDP growth. Real non-oil GDP is project- sidered, and the sector may face additional accordance with the NRF Act 2021. In ed to expand by an average of 9.4 percent risks amid global decarbonization efforts. February 2024, the government passed annually, including through positive Addressing climate change risks remains the Fiscal Enactments Amendment Bill spillovers from the oil sector, supported by central to poverty reduction given that sea 2024 that authorizes a significant increase the Local Content Act, and the strong pub- level rise and flooding expose large seg- in the withdrawal limit from the NRF and lic investment program, boosting agricul- ments of the population to food insecurity higher ceilings on domestic and external tural output and construction. Inflation is and job losses. TABLE 2 Guyana / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f a Real GDP growth, at market prices (total) 20.1 63.3 33.0 34.3 16.8 18.2 b Real GDP growth, at market prices (non-oil) 4.6 11.5 11.7 11.9 8.2 7.9 Agriculture -9.1 11.7 7.0 10.4 6.0 4.2 Industry 5.0 12.7 13.0 9.7 8.7 7.7 Services 12.1 9.3 10.5 6.9 6.8 6.5 Inflation (consumer price index) 4.8 6.4 2.8 3.8 5.0 5.5 c Current account balance (% of GDP) -24.8 25.9 11.8 35.3 15.6 20.9 d Fiscal balance (% of GDP) -10.1 -11.7 -14.6 -23.4 -21.0 -18.2 Debt (% of GDP) 38.9 24.8 28.5 27.8 23.8 20.8 d Primary balance (% of GDP) -9.4 -11.1 -13.7 -22.2 -19.8 -16.5 GHG emissions growth (mtCO2e) 4.9 15.9 12.4 13.4 8.3 8.5 Energy related GHG emissions (% of total) 24.7 33.5 39.7 45.8 48.9 51.9 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Total GDP at 2012 prices. b/ Non-oil GDP at 2012 prices. c/ BOP definition in current US$. d/ Share of non-oil GDP. MPO 33 Apr 24 the downward inflation trajectory, it is crucial to tackle the persistent fiscal chal- HAITI Key conditions and lenges arising from low tax revenue col- lection and to curtail monetary financing challenges of the budget. Table 1 2023 Haiti’s economy has been hindered by Population, million 11.7 deep structural challenges, including a GDP, current US$ billion 19.9 weak business environment and inade- Recent developments GDP per capita, current US$ 1694.1 quate public services, with limited job a 29.2 International poverty rate ($2.15) growth, a large share of unskilled workers, GDP continues to fall, due to heightened a 58.0 and few employment opportunities. The insecurity that affects all sectors. The agri- Lower middle-income poverty rate ($3.65) a 85.8 small industrial base related to textiles, ap- cultural sector, which employs over 40 per- Upper middle-income poverty rate ($6.85) Gini index a 41.1 parel, and light manufacturing, relies cent of the labor force, registered the Life expectancy at birth, years b 63.2 heavily on imports and suffers from weak largest decline (-5.6 percent), contributing Total GHG emissions (mtCO2e) 11.3 institutions. Growth has been hampered to increased poverty and food insecurity, by a persistent political crisis and escalat- as many poor households depend on agri- Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2012), 2017 PPPs. ing gang violence, further eroding the al- culture for their livelihood. Enhancing b/ Most recent WDI value (2021). ready low human capital and institutional agricultural productivity is therefore a crit- capacity and Haiti has become highly un- ical policy focus to foster inclusive growth safe. Though gang violence manifests and improve equity. The textile sector, the mainly in Port au Prince, it has spread to largest formal private-sector employer, other parts of the country. lost about 26,000 jobs (nearly half of the The political crisis and increasing gang Haiti is vulnerable to natural hazard 56,000) in FY23, as two large textile/appar- violence continue to impact economic shocks, which are compounded by in- el operations closed and others had op- activity, with Haiti experiencing another adequate disaster risk management and erations disrupted. In the current context year of negative growth in FY23. Haiti response systems, leaving the country where economic opportunities are scarce has one of the highest levels of food inse- poorly equipped to handle the impacts and social safety nets limited, job losses of climate change. Issues such as wide- have driven many of these workers and curity in the world, tripling the number spread deforestation, watershed degrada- their families into poverty. The poverty of food-insecure people since 2016. Infla- tion, inadequate land use practices, limit- rate in FY23 was estimated at 63 percent tion remains high but is decelerating as ed infrastructure, unmaintained drainage ($3.65 per day). Other sectors, such as con- monetary policy tightens and global infrastructure, and inadequate waste struction, electricity, water, and transport management, make Haiti extremely sen- have also seen significant declines. The ser- price pressures ease. Despite significant sitive to natural hazards, which further vices sector contracted by 2.9 percent, with job losses in the textile sector, remit- exacerbates food insecurity and intensi- the hospitality industry most affected. On tances remain buoyant, supporting fies disease outbreaks. the demand side, both public and private household consumption levels. Inflation is declining, yet food prices re- investments have collapsed due to the high main elevated, disproportionately affect- level of insecurity and uncertainty, and ing the poorest households. To sustain government spending remains muted. FIGURE 1 Haiti / Real GDP growth and sectoral contributions FIGURE 2 Haiti / Actual and projected poverty rates and real to real GDP growth, supply side GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 3 100 70000 2 90 60000 80 1 70 50000 60 40000 0 50 -1 30000 40 30 20000 -2 20 10000 -3 10 0 0 -4 2012 2014 2016 2018 2020 2022 2024 2026 2018 2019 2020 2021 2022 2023e 2024f International poverty rate Lower middle-income pov. rate Agriculture Industry Services GDP Upper middle-income pov. rate Real GDP pc Source: World Bank staff calculations. Source: World Bank. Notes: see Table 2. MPO 34 Apr 24 Consumption remains relatively buoyant, In the external sector, exports declined should help narrow the fiscal deficit to 1.4 supported by remittances, which remain more rapidly than imports, principally due percent of GDP in FY24. Fiscal consolida- strong. However, the disruption to imports to the downturn in the textile industry. Re- tion efforts are expected to continue over and transportation by gangs undermines mittances remained strong at 18.9 percent the medium term, and with revenue in- access to food and essential goods. of GDP, a slight decrease compared with creases, the fiscal deficit should fall to near Tax revenue collection improved in FY23, FY22. Overall, the current account deficit 1.0 percent of GDP. thanks to tighter customs control and in- widened to 3.4 percent of GDP. Despite a decrease in global price pres- creased oil tax revenue. However, the tax-to- sures, persistent high fuel and food GDP ratio remains low at 6.3 percent. Efforts prices, along with low agricultural pro- to reduce energy subsidies and limit capital ductivity will keep inflation high at 27 spending have improved the fiscal position, Outlook percent in FY24 and 20 percent in FY25. lowering financing needs. The fiscal deficit The ongoing erosion of household pur- narrowed to 2.3 percent of GDP in FY23 from Haiti will experience another year of neg- chasing power and the sustained econom- 3.2 percent in FY22. Consequently, central ative growth in FY24 (-1.8 percent) due to ic downturn are expected to exacerbate bank (BRH) monetary financing of the heightened insecurity, though the growth poverty and food insecurity. Challenges deficit declined but continued to exceed path remains highly uncertain and depen- in the export sector, lower imports, and statutory limits. Inflation decelerated dur- dent on security improvements and polit- high remittances, are projected to result in ing the second half of FY23 but remained ical developments. Public and private in- a modest current account deficit. high at 44.2 percent in FY23 due to contin- vestments are expected to continue to fall Haiti is facing a severe crisis and the ued monetization of the deficit, low agri- significantly in this insecure environment inability to achieve a resolution carries cultural productivity, and gang-related from already low levels. Private consump- large downside risks. Addressing the se- disruptions that hinder the transport of tion should remain stable, supported by curity situation and bringing inflation un- goods, affecting poor and vulnerable decelerating inflation and strong remit- der control by reducing monetary financ- households the most. As of June 2023, an tances. With negative real growth, per ing of the fiscal deficit are key for macro- estimated 49 percent of Haiti’s population capita GDP is projected to further decline economic stability, growth, and poverty was facing acute food insecurity. in FY24 (-3.0 percent), leading to an in- reduction. Reducing disaster risks by The exchange rate depreciated by 13.7 crease in poverty rates to over 64 percent strengthening the institutional framework percent in FY23, following a 16.4 percent ($3.65 per day). and response system is also essential for depreciation in FY22, though it has ap- The anticipated decline in energy subsi- inclusive growth as the risk of natural preciated marginally over recent months. dies, creating additional fiscal space, disasters is high. TABLE 2 Haiti / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020/21 2021/22 2022/23e 2023/24f 2024/25f 2025/26f Real GDP growth, at constant market prices -1.8 -1.7 -1.9 -1.8 1.9 2.0 Private consumption 1.2 -0.7 0.1 0.0 0.7 0.6 Government consumption 9.7 17.6 3.3 27.5 15.0 15.1 Gross fixed capital investment -28.8 -9.9 -17.6 -53.0 16.5 12.3 Exports, goods and services 23.5 2.4 -9.6 -5.4 1.5 2.1 Imports, goods and services 2.3 4.9 -0.4 1.6 5.5 5.5 Real GDP growth, at constant factor prices -2.8 -1.8 -3.6 -1.9 1.9 2.1 Agriculture -4.1 -4.5 -5.6 -1.0 1.5 2.0 Industry -2.5 -0.4 -3.8 -2.2 2.0 1.5 Services -2.5 -1.6 -2.9 -2.1 2.0 2.4 Inflation (consumer price index) 15.9 27.6 44.2 27.1 20.0 11.5 Current account balance (% of GDP) 0.4 -2.4 -3.4 -3.6 -4.2 -3.7 Net foreign direct investment inflow (% of GDP) 0.2 0.2 0.1 0.2 0.2 0.2 Fiscal balance (% of GDP) -2.5 -3.2 -2.3 -1.4 -1.4 -1.0 Revenues (% of GDP) 6.9 6.6 8.0 8.0 7.8 7.8 Debt (% of GDP) 28.4 27.6 30.2 30.0 26.5 22.7 Primary balance (% of GDP) -2.2 -2.9 -2.0 -1.1 -1.1 -0.8 a,b International poverty rate ($2.15 in 2017 PPP) 31.3 32.3 34.2 35.3 34.9 34.6 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 60.1 61.6 62.8 64.4 64.1 63.9 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 87.5 88.0 88.6 89.1 89.0 88.8 GHG emissions growth (mtCO2e) 3.5 0.3 -0.6 0.6 1.4 1.5 Energy related GHG emissions (% of total) 37.6 37.1 36.1 35.7 35.7 35.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2012-ECVMAS. Actual data: 2012. Nowcast: 2013-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2012) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 35 Apr 24 poverty and risk often concentrated in the same geographic areas. HONDURAS Key conditions and challenges Table 1 2023 Recent developments Honduras grew on average 3.7 percent Population, million 10.6 per year in 2010-19, largely driven by Real GDP growth decelerated to an esti- GDP, current US$ billion 31.9 remittance-fueled households’ consump- mated 3.5 percent in 2023, down from 4.0 GDP per capita, current US$ 3013.4 tion. Growth was underpinned by pru- percent in 2022, influenced by a decrease a 12.7 International poverty rate ($2.15) dent macroeconomic policies, including in US textile demand which drove a a 26.4 adherence to the Fiscal Responsibility 7.2 percent contraction in manufacturing. Lower middle-income poverty rate ($3.65) a 49.5 Law (FRL), a stable exchange rate, ade- The economy was partially buoyed by Upper middle-income poverty rate ($6.85) Gini index a 48.2 quate foreign reserves, and a robust fi- steady remittances and sustained credit School enrollment, primary (% gross) b 83.8 nancial sector. However, the country's growth, which supported household con- b 70.1 productive capacity has not expanded. sumption and investment, helping offset Life expectancy at birth, years As a result, the creation of formal jobs the export decline. Total GHG emissions (mtCO2e) 29.0 has been weak, which alongside wide- Inflation eased to 6.7 percent by in 2023, af- Source: WDI, Macro Poverty Outlook, and official data. spread crime and violence fuels migra- ter peaking at 9.1 percent in 2022, reflect- a/ Most recent value (2019), 2017 PPPs. b/ Most recent WDI value (2021). tion. Agriculture and light manufactur- ing lower international prices and re- ing, particularly the textile maquila, are sponding to central bank liquidity absorp- key sources of employment and exports, tion measures, comprising open market mainly to the US. operations and increases in reserve re- Honduras is one of the poorest and quirements and the overnight rate, which most unequal countries in Latin Amer- pushed up market interest rates. The re- Growth has been moderate and dependent ica and the Caribbean (LAC) and grap- placement of the interbank foreign ex- on remittances and external demand. It ples with increasing food insecurity, change (FX) market with a central bank decelerated to 3.5 percent in 2023 and is which rose from 40.9 percent in 2018 auction system in April 2023 led to some to 56.1 percent in 2021. Human de- FX scarcity and uncertainty regarding its expected to decrease slightly to 3.4 per- velopment indicators are concerning. future availability, although dollars re- cent in 2024 due to slower US growth. A child born in Honduras in 2020 is main available in the economy, bolstered Stable macroeconomic conditions have projected to achieve only 48 percent by strong remittances. not led to more or better jobs, which com- of the labor market productivity they Unemployment fell to 6.4 percent in June bined with natural disasters, food insecu- could attain if they received high-qual- 2023 -from 8.6 percent in 2021- but re- ity education and healthcare. Signifi- mained above pre-pandemic levels. La- rity, and crime, has led to persistent mi- cant gender disparities and informali- bor market gender disparities persist, gration. Poverty remains above pre-pan- ty levels in the labor market hamper with women’s unemployment nearly demic levels, despite lower inflation. poverty reduction efforts. Additional- doubling men’s, while female labor force ly, Honduras is extremely susceptible participation (40 percent in 2023) is about to the impacts of climate change, with half the male rate. In 2023, poverty FIGURE 1 Honduras / Real GDP by sector, index 2000=1 FIGURE 2 Honduras / Actual and projected poverty rates and real GDP per capita Index 1=2000 Poverty rate (%) Real GDP per capita (constant LCU) 3.0 70 30000 Agriculture Service 60 25000 2.5 Industry 50 20000 2.0 40 15000 30 1.5 10000 20 10 5000 1.0 0 0 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 0.5 International poverty rate Lower middle-income pov. rate 2000 2003 2006 2009 2012 2015 2018 2021 2024 Upper middle-income pov. rate Real GDP pc Source: World Bank staff calculations based on Honduras Central Bank data. Source: World Bank. Notes: see Table 2. MPO 36 Apr 24 (US$6.85 line) is estimated to have term. The fiscal deficit is projected to ex- reached 51.3 percent, declining from 2022 pand to 2.5 percent of GDP in 2024 as bud- but still above pre-pandemic levels, and Outlook get execution continues to improve and inequality (Gini index) is estimated to narrow gradually over the medium term have been 47.3. Growth is projected to slow to 3.4 percent towards the FRL’s 1 percent target, sup- Despite the drop in exports, driven by in 2024 and 3.3 percent in 2025, with a sub- ported by broadening of the tax base and lower volumes in textiles and lower dued US economy delaying the recovery enhanced efficiency of revenue collection international prices for coffee and of manufacturing exports and dampening and public spending. The CAD is projected palm oil, the trade deficit decreased remittances, leading to a deceleration of to remain stable in 2024 and mildly dete- by 9.2 percent y-o-y by Q3-2023 due households’ consumption growth. Lower riorate in 2025, gradually narrowing there- to reduced imports of industrial inputs food inflation, growing external demand after as export demand and remittances and lower energy prices. Remittances for agricultural products, and strong pub- strengthen. However, pressures on inter- grew strongly, by 5.8 percent y-o-y in lic investment will provide some counter- national reserves are likely to persist, as November 2023, helping to narrow the balance. Growth is expected to gradually net FDI and other medium and long-term current account deficit (CAD) from 6.6 increase thereafter, supported by improv- capital inflows are not expected to improve percent of GDP in 2022 to an esti- ing global conditions and dynamic public significantly in the short term. mated 4 percent in 2023, primarily fi- and private investment. Significant downside risks exist. Lack of im- nanced by multilateral debt and for- Poverty is expected to decline to 50.5 per- provement in FX management could trigger eign direct investment (FDI). By the cent in 2024 and 50.3 percent in 2025, further loss of reserves. Persistent weakness end of 2023, foreign reserves stood at thanks to a robust agricultural sector and in textile exports and short-term transition US$7,555.9 million, around 5 months low inflation, with inequality projected to costs of the Honduras-China Free Trade of non-maquila imports. reach 47.3 and 47.1 respectively (Gini in- Agreement could exacerbate the CAD, also The fiscal deficit is estimated to have dex). Poverty is forecasted to decrease fur- reducing international reserves. Inflation- widened to 1.3 percent of GDP in 2023, ther in 2026 (49.6 percent), approaching ary pressures could re-emerge from escalat- as the execution of public investments pre-pandemic levels, primarily due to re- ing geopolitical conflict. Slower-than-antic- improved in the second semester, par- covering exports and remittances. ipated fiscal consolidation and adverse cli- ticularly in energy, roads, and produc- Inflation is expected to fall within the cen- mate events could increase financing needs. tive projects. Public debt decreased to tral bank's target range (4±1 percent) in Capacity constraints and legislative grid- 45.1 percent of GDP by June 2023, down 2024, in line with declining international lock could impede social and structural re- from 46.2 percent in June 2022, due to prices, despite potential renewed energy forms, negatively affecting investment, net capital repayments. inflation, and stay subdued in the medium growth, and poverty reduction. TABLE 2 Honduras / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 12.5 4.0 3.5 3.4 3.3 3.4 Private consumption 15.4 6.1 3.8 3.8 3.7 3.9 Government consumption 8.5 0.8 1.4 1.2 1.1 1.2 Gross fixed capital investment 34.7 5.6 5.3 4.2 4.0 4.2 Exports, goods and services 22.5 6.9 3.9 4.0 4.0 4.2 Imports, goods and services 35.5 9.8 3.9 4.0 3.9 4.2 Real GDP growth, at constant factor prices 12.5 4.0 3.5 3.4 3.3 3.4 Agriculture 0.4 -0.7 3.6 3.9 4.0 4.1 Industry 20.1 5.3 4.2 4.0 4.0 4.2 Services 12.5 4.5 3.2 3.1 2.9 2.9 Inflation (consumer price index) 4.5 9.1 6.7 4.6 4.1 4.2 Current account balance (% of GDP) -5.4 -6.6 -4.0 -4.0 -4.1 -3.9 Net foreign direct investment inflow (% of GDP) 1.8 2.3 1.8 1.8 1.8 1.9 a Fiscal balance (% of GDP) -3.7 -0.2 -1.3 -2.5 -1.8 -1.0 Revenues (% of GDP) 30.0 29.6 30.1 30.0 30.1 30.4 a Debt (% of GDP) 51.6 52.3 52.9 53.2 52.4 51.5 a Primary balance (% of GDP) -2.8 0.4 -0.6 -1.8 -1.2 -0.4 b,c International poverty rate ($2.15 in 2017 PPP) 14.5 13.3 12.2 12.0 11.9 11.8 b,c Lower middle-income poverty rate ($3.65 in 2017 PPP) 29.6 28.2 26.8 26.2 25.7 25.6 b,c Upper middle-income poverty rate ($6.85 in 2017 PPP) 53.3 52.4 51.3 50.5 50.3 49.6 GHG emissions growth (mtCO2e) 4.3 -0.1 0.5 1.3 1.4 1.6 Energy related GHG emissions (% of total) 33.4 31.7 30.5 30.1 29.8 29.6 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Fiscal data refers to non-financial public sector. b/ Calculations based on SEDLAC harmonization, using 2019-EPHPM. Actual data: 2019. Nowcast: 2020-2023. Forecasts are from 2024 to 2026. c/ Projections using microsimulation methodology. MPO 37 Apr 24 capital, and future earning potential of students if not addressed adequately. JAMAICA Key conditions and Jamaica is also highly vulnerable to exter- nal shocks given its reliance on imports challenges and tourism. Tourism and agriculture, which account for more than half of jobs, Table 1 2023 Jamaica has been a highly indebted econ- are vulnerable to external shocks, espe- Population, million 2.8 omy for decades. Since 2013, the Govern- cially climate-related ones, which could GDP, current US$ billion 18.8 ment (GOJ) has successfully implemented undermine growth and poverty reduc- GDP per capita, current US$ 6666.6 fiscal consolidation measures, reducing the tion. The financial sector is stable, well- a 0.3 International poverty rate ($2.15) public debt-to-GDP ratio by more than 60 capitalized, and profitable but also sus- a 2.4 percentage points to 75.5 percent in 2023 ceptible to various shocks. To strengthen Lower middle-income poverty rate ($3.65) a 13.9 – the lowest level in 25 years. Prudent fiscal, financial, and social resilience to Upper middle-income poverty rate ($6.85) Gini index a 40.2 macroeconomic management, anchored climatic shocks, Jamaica has been grad- School enrollment, primary (% gross) b 90.7 on debt reduction targets and inflation-tar- ually integrating climate change adapta- b 70.5 geting monetary policy with ample foreign tion into its policy framework. Further Life expectancy at birth, years reserves, facilitated post-pandemic recov- improving anti-AML/CFT framework and Total GHG emissions (mtCO2e) 9.5 ery amid challenging external environ- enhancing financial supervision is neces- Source: WDI, Macro Poverty Outlook, and official data. ment of inflationary pressures and tighten- sary to strengthen financial stability and a/ Most recent value (2021), 2017 PPPs. b/ WDI for School enrollment (2022); Life expectancy ing global financial conditions. A strength- attract private investment. Broader pro- (2021). ened social protection system provided motion of digital financial services will temporary assistance to vulnerable house- enhance financial inclusion. holds and businesses during the pandemic Structural and institutional reforms to offset income losses, protect jobs, and strengthened macroeconomic manage- stimulate demand. Additional assistance ment over recent years. This allowed the was provided to vulnerable households to Recent developments mitigate the impact of rising prices. government to respond to the pandemic However, fiscal consolidation adversely The Jamaican economy surpassed its pre- and inflation shocks without significantly affects growth while relatively high debt- pandemic level, expanding in real terms impairing fiscal sustainability and pover- service costs crowd out other government by 2.9 percent y-o-y in the first three spending, including capital investment, quarters of 2023. Growth was driven by ty reduction objectives. Jamaica’s real which is critical to boost growth. Jamaica net exports from a record expansion in GDP surpassed its pre-crisis level in has been among the slowest growing tourism and mining, while agriculture de- 2023, and poverty is gradually declining economies in LAC given its concentration clined due to an extended drought. Rising towards pre-crisis levels. Progress in low- in low productivity services, limited tech- economic activity brought the unemploy- ering public debt and reducing poverty nology adoption and innovation, a weak ment rate to a record-low 4.2 percent in business environment, high connectivity October 2023. Poverty ($6.85 per day) de- may be slower than expected if global eco- clined from 13.9 in 2021 to an estimated costs, and pervasive crime. Learning dis- nomic conditions deteriorate and if con- ruptions during the pandemic risk fur- 12.3 percent in 2023. The quality of em- straints to growth remain unaddressed. ther corrosive effects on growth, human ployment remains a concern given high FIGURE 1 Jamaica / Public debt and net international FIGURE 2 Jamaica / Actual and projected poverty rates and reserves real GDP per capita Percent of GDP Million US$ Poverty rate (%) Real GDP per capita (constant LCU) 160 8000 16 350000 140 7000 14 340000 120 6000 12 330000 100 5000 10 320000 80 4000 8 310000 60 3000 6 300000 4 290000 40 2000 2 280000 20 1000 0 270000 0 0 2021 2023 2025 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Lower middle-income pov. rate Upper middle-income pov. rate Public Debt Net International Reserves (rhs) Real GDP pc Sources: Bank of Jamaica, Ministry of Finance and the Public Service, and World Source: World Bank. Notes: see Table 2. Bank staff calculations. MPO 38 Apr 24 informality (46.8 percent of non-agricul- compensation cycle. To further de-dollar- offset by reduced spending on imports in tural employment in 2020) and fewer ize the public debt and mitigate foreign the context of lower commodity prices. average hours worked relative to pre- exchange risk, the GOJ issued its first Higher wages and the second phase of pandemic levels. domestic-currency international bond for the PPV fare increase in 2024 are antici- Annual inflation accelerated to 7.4 percent J$46.6 billion (US$300 million) in Novem- pated to continue to generate inflationary in January 2024 (5.1 percent in October ber 2023. In the context of prudent fiscal pressures in the near term, diminishing 2023) – above the Bank of Jamaica (BOJ)’s management and macroeconomic stabili- the purchasing power of households. BOJ reference range (5 ±1 percent). This was in- ty, Jamaica’s credit worthiness improved. is likely to maintain tight monetary policy fluenced by (i) a sharp increase in food The external position remained strong, while ensuring adequate liquidity in the inflation amid droughts, (ii) increased supported by robust earnings from financial system, minimizing pressures on public passenger vehicle (PPV) fares, (iii) tourism and remittances. The current ac- the currency, and returning inflation to its increases in telephone and internet rates, count recorded an estimated surplus of 2.5 target range by mid-2025. Poverty is pro- and (iv) a minimum wage increase of 44 percent of GDP in the first half of 2023. jected to continue a gradual decline as re- percent (over the previous rate as of Ju- Reserves remain adequate, at US$4.7 bn in al incomes improve. ly 2023) coupled with tighter labor mar- January 2024 (about 5.8 months of imports The fiscal account is expected to reverse ket. Persistent high food price inflation and 25 percent of GDP). In this context, the to surplus over the medium term as a (8.8 percent in January 2024) continued exchange rate remained relatively stable. result of improvements in tax revenue to undermine food security (33 percent and prudent spending. Spending is ex- of Jamaicans were severely food insecure pected to decline slightly due to lower in May 2023). The BOJ has kept the key interest payments. Public debt is project- policy rate at 7.0 percent since end-2022, Outlook ed to remain on a downward trajectory, maintained foreign currency interventions declining to 65.9 percent of GDP by 2026. to support the Jamaican dollar and price Annual growth is expected to average Gross reserves are expected to remain at stability, and tightened Jamaican dollar only 1.7 percent y-o-y over the medi- healthy levels. liquidity conditions. um term as global demand weakens Significant downside risks to the economic The GOJ sustained efforts in fiscal con- and fiscal austerity limits capital in- outlook include a possible deeper-than-ex- solidation while prioritizing social protec- vestments. Mining, tourism, and pri- pected global economic slowdown. Fur- tion. The fiscal stance was supported by vate investment in hospitality capacity ther tightening of financial market condi- strong tax revenues. However, the fiscal and infrastructure are expected to dri- tions could raise the cost of borrowing, account is estimated to have registered a ve growth. External account balances curtail private investments, and derail deficit of 1.4 percent of GDP in 2023 from are expected to slightly deteriorate as longer-term growth, climate change adap- a surplus of 1.6 percent in 2022 due to tourism and remittances growth is ex- tation, and debt objectives. Worsening increased spending on wages and salaries pected to slow amid weaker economic crime and natural hazards could also im- amid the recently approved three-year conditions in the US and UK, partially pair growth and poverty reduction. TABLE 2 Jamaica / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 4.6 5.2 2.6 2.0 1.6 1.6 Real GDP growth, at constant factor prices 4.6 5.2 2.6 2.0 1.6 1.6 Agriculture 8.3 9.0 -7.5 1.9 0.9 0.9 Industry 2.4 -0.4 5.9 2.5 1.4 1.4 Services 4.9 6.5 2.8 1.9 1.7 1.7 Inflation (consumer price index) 5.9 10.3 6.5 7.0 6.2 5.4 Current account balance (% of GDP) 1.0 -0.7 0.8 0.2 -0.8 -1.4 Net foreign direct investment inflow (% of GDP) 1.8 1.5 1.6 1.7 1.9 2.0 Fiscal balance (% of GDP) 0.0 1.6 -1.4 -0.4 -0.2 0.1 Revenues (% of GDP) 30.3 30.2 30.8 31.3 30.8 30.7 Debt (% of GDP) 100.5 83.5 75.5 70.8 68.9 65.9 Primary balance (% of GDP) 6.0 7.2 4.3 3.0 2.3 2.8 a International poverty rate ($2.15 in 2017 PPP) 0.3 0.3 0.3 0.3 0.3 0.3 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 2.4 2.0 1.7 1.6 1.5 1.5 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 13.9 12.7 12.3 11.8 11.3 11.1 GHG emissions growth (mtCO2e) 9.8 7.0 4.2 3.1 1.8 1.8 Energy related GHG emissions (% of total) 77.8 79.2 79.9 80.5 80.8 81.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on CONLAC harmonization, using 2021-JSLC. Actual data: 2021. Nowcast: 2022-2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2021) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 39 Apr 24 from 43.9 percent in 2020 to 36.3 percent in 2022, lifting 8.9 million Mexicans from MEXICO Key conditions and poverty, with 46.8 million still living in poverty. The decline is mainly due to the challenges fall in monetary poverty, which fell from 52.8 to 43.5 percent. Table 1 2023 Mexico is among the most open economies Mexico has a strong track record of macro- Population, million 128.5 globally, thanks to its macroeconomic sta- economic stability, supported by an inde- GDP, current US$ billion 1791.4 bility, strategic proximity to major con- pendent central bank and a sound finan- GDP per capita, current US$ 13945.6 sumer markets, a wide array of trade cial sector. The recent shift towards a more a 1.2 International poverty rate ($2.15) agreements (particularly USMCA), and a state-led growth model will likely pose a 21.8 diversified economy. Its integration into challenges for public finances: a high fiscal Upper middle-income poverty rate ($6.85) a 43.1 global value chains and a dynamic albeit deficit is anticipated for 2024, along with Gini index School enrollment, primary (% gross) b 103.4 informal labor market contribute to the re- mounting spending pressures from social Life expectancy at birth, years b 70.2 cent economic dynamism, surpassing re- programs, efforts to enhance access and Total GHG emissions (mtCO2e) 677.5 gional peers' growth. The anticipated quality of public services, essential infra- nearshoring trend offers additional oppor- structure investment needs, replenishment Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2022), 2017 PPPs. tunities, particularly in manufacturing and of trust funds, and substantial fiscal sup- b/ Most recent WDI value (2021). related services such as logistics, utilities, port to PEMEX. Addressing these pres- and finance. Mexico’s high integration sures will likely require revenue-boosting with the U.S. economy also makes it highly reforms to safeguard debt sustainability. reliant on the U.S. business cycle. Despite these strengths, Mexico faces sig- nificant challenges, including decreasing productivity, violence, and pervasive in- Recent developments Real GDP growth is expected to be formality. As indicated in the Productivity 2.3 percent in 2024 and gradually Report (2019), to unleash its full potential, Real GDP grew 3.2 percent in 2023, driven converge to its potential by 2026. Mexico must bolster infrastructure, im- by consumption and investment, with a prove the business environment, facilitate slight weakening observed in the fourth Poverty has declined significantly since access to finance, especially for small and quarter. On the supply side, growth was 2020, but structural reforms are need- medium enterprises, address insecurity driven by the construction, retail, whole- ed to boost productivity, competitive- and regulatory uncertainty, improve pub- sale, transport, and manufacturing sectors. ness, and inclusion. Persistent infla- lic services provision, and strengthen the The current account deficit was 0.3 per- competition framework. Addressing these cent of GDP in 2023, financed by net FDI, tion and slower-than-expected growth issues is imperative to bolster competitive- which reached 1.7 percent of GDP. Ex- in the US are key downside risks. ness, revitalize stagnant productivity, and ports grew by 0.3 percent in 2023, while foster more inclusive economic growth. imports remained fairly constant in re- The official multidimensional poverty al terms. The Mexican peso appreciated rate, which combines monetary poverty 8.1 percent (y-o-y) in February 2024, sup- with indicators of social deprivation, fell ported by the interest rate differential, FIGURE 1 Mexico / Headline inflation and contributions to FIGURE 2 Mexico / Actual and projected poverty rates and headline inflation real GDP per capita Percentage (y/y) Poverty rate (%) Real GDP per capita (constant LCU) 10 45 210000 40 205000 8 200000 35 195000 6 30 190000 25 185000 4 20 180000 2 15 175000 170000 10 0 165000 5 160000 -2 0 155000 Jan'22 May'22 Sep'22 Jan'23 May'23 Sep'23 Jan'24 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 Core Tradables Core Services Non-Core Food International poverty rate Upper middle-income pov. rate Non-Core Energy Non-Core Utilities Inflation Real GDP pc Source: INEGI. Source: World Bank. Notes: See Table 2. MPO 40 Apr 24 manageable public debt, and a solid ex- higher fuel tax revenues after the cessa- in oil revenues, higher financial costs, ternal account. In 2023, remittances stood tion of gasoline subsidies, although low- increased social program spending, and at US$63.3bn (7.6 percent y-o-y), while er oil prices partly offset this. Expen- greater public investment in flagship pro- reserves reached US$212bn. ditures increased by 1.8 percent in real jects. As these projects are completed and Inflation has declined but remains above terms, with financial costs surging by 21.5 interest rates normalize, the fiscal deficit the central bank’s target range of 3 percent percent. Despite Moody's recent down- is projected to decrease to 2.8 percent of ± 1 percent since September 2022. In Feb- grade of PEMEX's credit rating, which GDP by 2026 gradually. ruary, annual headline (core) inflation remains non-investment grade for most Monetary poverty, measured by the up- reached 4.4 (4.6) percent. Consequently, agencies, Mexico's overall credit rating re- per-middle income global threshold the Central Bank of Mexico has kept the mains classified as investment grade. ($6.85/day per capita, 2017 PPP), is expect- policy rate at a historically high level, cur- ed to reach 20.2 percent in 2024 and 19.2 rently at 11 percent. percent in 2026 as the economy converges Labor poverty, defined as the share of the to its potential growth rate. population whose labor earnings fall be- Outlook Mexico's macroeconomic risks appear bal- low the food poverty line, decreased from anced, with a positive economic outlook bol- 40.3 percent in 2021Q4 to 37.0 percent in Mexico’s economic growth is projected to stered by declining inflation and growing 2023Q4, lower than the pre-pandemic level moderate to 2.3 percent in 2024 and 2.1 investment from nearshoring. Nonetheless, of 38.9 percent in 2019Q4. Real labor in- percent in 2025. The growth drivers will be prolonged high-interest rates could damp- come per capita, adjusted for the cost of services, manufacturing, and construction. en investment and add fiscal pressures. Ex- the official food basket, grew by 8.2 per- This dynamic is attributed to tight mone- ternal factors like slower U.S. economic cent between 2022Q4 and 2023Q4. This im- tary policy, the anticipated easing of the growth, renewed financial market volatil- provement in labor earnings, along with U.S. economy, and the slowdown of do- ity, or tighter monetary policy could di- a decline in the unemployment rate (from mestic demand due to years of growth minish exports and FDI. While upcoming 3.7 to 2.7 between 2021Q4 and 2023Q4) and above potential. As nearshoring-linked Mexican and U.S. elections may introduce informality rate (from 55.8 to 54.8 percent and public investment projects are final- policy uncertainty, a solid macroeconomic over the same period) and an increase in ized, Mexico is anticipated to return to its framework ensures stability. Additionally, the participation rate (from 59.7 to 60.5 potential growth rate of 2 percent over the El Niño could affect agricultural produc- percent), indicates ongoing labor market medium term. Inflation is expected to tion and commodity prices, potentially improvement which supports recent reach its target range during 2024H1. hindering poverty reduction. Improve- poverty reduction. The 2024 public budget anticipates an ments in business climate, strategic invest- In 2023, the overall fiscal deficit was 4.3 overall fiscal deficit of 5.4 percent of ments in human capital and infrastruc- percent of GDP. Public revenues rose by GDP, with a primary deficit of 1.2 per- ture, and policy stability are essential to 1 percent in real terms y-o-y, thanks to cent. This reflects an expected reduction attract further FDI. TABLE 2 Mexico / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 5.7 3.9 3.2 2.3 2.1 2.0 Private consumption 8.1 5.2 4.3 2.1 2.0 2.0 Government consumption -0.5 1.2 0.7 0.9 -1.2 0.4 Gross fixed capital investment 9.7 7.7 18.6 6.9 5.8 4.6 Exports, goods and services 7.2 8.7 -6.8 2.4 3.8 4.3 Imports, goods and services 15.0 8.3 4.7 4.2 4.7 5.0 Real GDP growth, at constant factor prices 5.5 3.8 3.2 2.3 2.1 2.0 Agriculture 2.3 1.6 1.9 1.7 1.9 2.1 Industry 6.7 5.3 3.5 2.6 2.3 2.1 Services 5.0 3.1 3.1 2.2 2.0 1.9 Inflation (consumer price index) 5.7 7.9 5.5 4.1 3.5 3.5 Current account balance (% of GDP) -0.3 -1.2 -0.3 -0.4 -0.6 -0.8 Net foreign direct investment inflow (% of GDP) -2.6 -1.5 -1.7 -1.9 -2.1 -2.2 Fiscal balance (% of GDP) -3.8 -4.3 -4.3 -5.4 -3.0 -2.8 Revenues (% of GDP) 22.4 22.4 22.2 21.5 21.1 21.0 Debt (% of GDP) 49.2 47.8 46.8 48.8 49.4 49.7 Primary balance (% of GDP) -1.2 -1.5 -1.0 -1.6 0.2 0.1 a,b International poverty rate ($2.15 in 2017 PPP) .. 1.2 1.1 1.1 1.0 1.0 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) .. 21.8 20.8 20.2 19.7 19.2 GHG emissions growth (mtCO2e) 2.4 0.7 0.6 0.5 0.4 0.4 Energy related GHG emissions (% of total) 63.6 63.1 62.6 62.2 61.8 61.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SEDLAC harmonization, using 2022-ENIGHNS. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. b/ Projection using neutral distribution (2022) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 41 Apr 24 natural hazards, along with low levels of human capital, infrastructure gaps, and NICARAGUA Key conditions and the weak institutional and business en- vironment, have constrained its growth challenges and social dividends. Nevertheless, Nicaragua has opportunities for sustain- Table 1 2023 Nicaragua is a small, open economy, driven able growth, through investment in hu- Population, million 7.0 by light manufacturing, services, and agri- man capital and value addition in manu- GDP, current US$ billion 17.9 culture. The country has improved access to facturing and services sectors. GDP per capita, current US$ 2547.2 basic services and set the fundamentals for a 3.9 International poverty rate ($2.15) macroeconomic stability. It has demonstrat- a 14.4 ed sound macroeconomic management Lower middle-income poverty rate ($3.65) Upper middle-income poverty rate ($6.85) a 42.1 with prudent fiscal and monetary policies, Recent developments Gini index a 46.2 and continued reserve accumulation in re- School enrollment, primary (% gross) b 107.2 cent years. Nicaragua has benefited sub- In 2023, the economy demonstrated robust b 73.8 stantially from foreign direct investment performance, with growth estimated at 4.3 Life expectancy at birth, years (FDI) and large remittances. Between 2010 percent. This expansion was driven by sec- Total GHG emissions (mtCO2e) 39.4 and 2017, GDP growth averaged 5.1 percent tors such as electricity, mining, trade, con- Source: WDI, Macro Poverty Outlook, and official data. on the back of solid private domestic de- struction, finance, transport, and commu- a/ Most recent value (2014), 2017 PPPs. b/ Most recent WDI value (2021). mand and exports. Poverty rate, measured nications, exceeding expectations. Con- at US$3.65 per day, more than halved be- sumption and investment increased. The tween 2005 and 2014, from 29 to 14 percent, Monthly Index of Economic Activity and is estimated to have continued declin- (IMAE) reflected a year-over-year increase ing in subsequent years up to 2018. of 5.5 percent in December 2023. Con- However, poverty increased to 15 percent sumption and investment increased by GDP growth in Nicaragua is estimated at by 2020 after the shocks from the sociopolit- 13.3 and 10 percent in the third quarter of 4.3 percent in 2023, supported by a steep ical unrest in 2018, the pandemic, and two 2023 compared to the third quarter of 2022. increase in remittances and foreign direct hurricanes. GDP rebounded strongly in Fiscal policy was managed prudently, 2021, helped by large public investment, fi- with a slight increase in revenues and investment. Growth will be sustained nanced by government deposits, external fi- controlled public spending, resulting in a over the medium term, though at a slight- nancial assistance, and export demand. But 0.7 fiscal deficit and 0.7 primary surplus. ly slower rate in the context of prudent this came at the expense of a surge in public By the close of the year, 95.7 percent of fiscal policy and limited progress in the debt which rose from 47.1 percent of GDP in the Public Investment Program had been implementation of growth-enhancing 2017 to a peak of 65.5 percent in 2021. executed, and public debt stood at 59.9 Nicaragua is among the poorest countries percent of GDP, marginally lower than structural reforms. The country has high in the region. Despite significant increases the previous year. exposure to external shocks and poverty in trade openness in the past two decades, Tight monetary policy, a managed ex- remains a persistent challenge. exports primarily consist of low-complex- change rate, and declining global prices ity products with limited destinations. have helped reduce inflation to 5.6 per- High vulnerability to external shocks and cent year-over-year in December 2023 FIGURE 1 Nicaragua / Real GDP growth and contributions FIGURE 2 Nicaragua / Actual and projected poverty rates to real GDP growth and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 25 60 35000 20 50 30000 15 10 25000 40 5 20000 0 30 15000 -5 20 -10 10000 -15 10 5000 -20 2000 2003 2006 2009 2012 2015 2018 2021 2024 0 0 2009 2011 2013 2015 2017 2019 2021 2023 2025 Gov. cons. Exports GFCF International poverty rate Lower middle-income pov. rate Inventories Private cons. Imports Statistical disc. GDP Upper middle-income pov. rate Real GDP pc Sources: Central Bank of Nicaragua and World Bank. Source: World Bank. Notes: see Table 2. MPO 42 Apr 24 from 11.6 percent in December of the relative to December 2022, but it remains day (2017 PPP), are expected to hover previous year. The Central Bank of substantially lower. around 13 percent in 2024-25. Nicaragua (CBN) kept the Monetary Pol- The 2024 budget adheres to the medium- icy Rate (MPR) at 7 percent throughout term budget framework and is consistent the year, maintaining the rate set after an with fiscal prudence goals to decrease pub- increase in 2022. Outlook lic debt and strengthen fiscal sustainabil- The current account deficit turned into a ity. Fiscal consolidation in the medium surplus of 4 percent of GDP in 2023, as In 2024, GDP growth is expected to decel- term is expected to rely on public invest- lower import costs, particularly for petro- erate, stabilizing at around 3.5 percent in ment cuts, with negative effects on growth, leum and fertilizers, improved the terms the medium term. This anticipated slow- as significant adjustments in current of trade, and remittances reached a record down is attributed to a decline in invest- spending require more profound reforms. high of over 27 percent of GDP. Strong ment as projects funded by multilateral or- The macroeconomic outlook is subject to FDI flows further helped to bolster net ganizations are completed and private in- several downside risks, including natural international reserves, which reached ap- vestors remain cautious. A moderation in disasters, geopolitical uncertainties that proximately six months of goods and ser- remittances, exports, and FDI inflows is could increase oil and food prices, eco- vices imports in 2023. projected to reduce the external surplus nomic downturns in major trading part- The sustained growth, coupled with lower yet continue to support the accumulation ners, and a decrease in concessional bor- inflation and higher remittances, led to an of international reserves. rowing. The ongoing El Niño climate phe- increased employment rate of 66.9 percent In line with the expected decreasing trend nomenon has resulted in drought and ex- in the second half of 2023, close to pre- in international inflation, domestic infla- treme temperatures, reducing crop pro- pandemic levels. Poverty, measured at tion is anticipated to be within the 4.0–5.0 ductivity and increasing food insecurity, US$3.65 per day (2017 PPP), was projected percent range in the medium term. The impacting the Dry Corridor, which could to decrease to 12.5 percent in 2023 from easing of intense inflationary pressures offset the positive effects of remittances 13.1 percent in 2022. The employment rate should help maintain short-term stability and lower inflation for certain population for women, at 56.9 percent in December in the Monetary Policy Rate (MPR) and segments. Growth prospects may also be 2023, showed a more significant increase alleviate pressures on purchasing power. dampened by a reduced labor supply due compared to men's rate, at 78.2 percent, Poverty levels, measured at US$3.65 per to significant emigration. TABLE 2 Nicaragua / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 10.3 3.8 4.3 3.7 3.5 3.5 Private consumption 8.7 5.9 4.9 3.8 3.7 3.6 Government consumption 9.3 -6.0 0.2 0.2 0.3 0.3 Gross fixed capital investment 26.3 -3.2 6.0 3.1 3.1 3.0 Exports, goods and services 18.1 8.6 4.0 3.2 3.1 3.0 Imports, goods and services 21.1 5.0 2.0 2.6 2.5 2.4 Real GDP growth, at constant factor prices 10.3 3.8 4.3 3.7 3.5 3.5 Agriculture 6.6 1.7 2.0 1.8 1.7 1.7 Industry 18.8 2.7 2.9 2.7 2.8 2.9 Services 8.5 4.7 5.5 4.6 4.3 4.1 Inflation (consumer price index) 4.9 11.6 5.6 4.8 4.3 4.0 Current account balance (% of GDP) -3.1 -1.4 4.0 3.0 2.4 2.0 Net foreign direct investment inflow (% of GDP) 8.5 8.2 6.8 6.4 6.0 5.6 a Fiscal balance (% of GDP) -1.5 0.5 -0.7 -0.6 -0.5 -0.3 Revenues (% of GDP) 31.4 32.0 32.1 32.0 32.1 32.2 b Debt (% of GDP) 65.5 60.5 59.9 59.0 58.6 57.8 a Primary balance (% of GDP) -0.3 1.9 0.7 0.8 0.9 0.9 c,d International poverty rate ($2.15 in 2017 PPP) 6.4 5.8 5.1 5.7 5.3 5.0 c,d Lower middle-income poverty rate ($3.65 in 2017 PPP) 14.2 13.1 12.5 13.0 12.6 12.1 c,d Upper middle-income poverty rate ($6.85 in 2017 PPP) 38.6 36.1 34.8 35.3 34.4 33.9 GHG emissions growth (mtCO2e) 1.3 0.8 1.0 0.9 1.0 1.0 Energy related GHG emissions (% of total) 12.8 12.6 12.7 12.7 12.8 12.8 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Fiscal and Primary Balance correspond to the non-financial public sector. b/ Debt is total public debt. c/ Calculations based on SEDLAC harmonization, using 2014-EMNV. Actual data: 2014. Nowcast: 2015-2023. Forecasts are from 2024 to 2026. d/ Projections using microsimulation methodology. MPO 43 Apr 24 ownership information which led Pana- ma to exit the International Financial Ac- PANAMA Key conditions and tion Task Force’s (FATF) list of juris- dictions in October 2023 and the EU’s challenges list for non-cooperative jurisdictions for tax purposes in March 2024. Comprehen- Table 1 2023 Panama is a crucial logistical and fi- sive reforms in Public Private Partner- Population, million 4.5 nancial hub in Central America, which ships (PPP) and procurement led to an GDP, current US$ billion 83.5 thrives on trade and services. The Pana- increase in PPP financing for important GDP per capita, current US$ 18690.9 ma Canal is critical for global trade and infrastructure projects. a 1.3 International poverty rate ($2.15) has an important impact on Panama’s a 4.4 economy. Yet, its growth has been pri- Lower middle-income poverty rate ($3.65) a 12.9 marily fueled by capital and labor accu- Upper middle-income poverty rate ($6.85) Gini index a 48.9 mulation. Sustained robust growth over Recent developments School enrollment, primary (% gross) b 101.5 the past thirty years supported strong job b 76.2 creation, leading to a sharp decrease in Due to street protests, the Supreme Life expectancy at birth, years poverty (from 48.2 percent in 1991 to 12.9 Court's declaration of the contract with Total GHG emissions (mtCO2e) 31.4 percent in 2023 at $6.85 a day per capi- Cobre Panama as unconstitutional, and a Source: WDI, Macro Poverty Outlook, and official data. ta, 2017 PPP). However, Panama remains slowdown in the Panama Canal driven a/ Most recent value (2023), 2017 PPPs. b/ WDI for School enrollment (2022); Life expectancy one of the most unequal countries in the by prolonged drought, growth deceler- (2021). world, in part because of its very unequal ated significantly in the last quarter of labor market and limited redistributive 2023, resulting in a 6.5 percent year-on- capacity. As growth started to decline in year increase for the entire year. This per- the second half of the 2010s, unemploy- formance was supported by a surge in Panama is estimated to have grown ment and informality started to increase, activities across various sectors, includ- peaking during the pandemic. Relative ing construction, transport and storage, 6.5 percent in 2023 fueled by strong to 2019, the labor market has not fully wholesale and retail commerce, utility, construction, commerce, transport, recovered, and the government’s emer- business services, and hotels and restau- tourism, the Colon Free Trade Zone, gency transfer Nuevo Programa Panama rants, which collectively employ 45 per- and financial activities during the first Solidario (NPPS) has played an impor- cent of the workers. Inflation decreased tant role in poverty reduction. to 1.5 percent in 2023, led by a reduction three quarters. Improving labor market Panama is an attractive offshore center in transport and food prices (Figure 1). conditions helped reduce poverty in due to its strategic location and dollariza- Progress in poverty reduction was, how- 2023. However, the economy faced sig- tion. Authorities implemented important ever, uneven in 2023 (Figure 2). The un- nificant challenges in Q4, including reforms in recent years to promote gov- employment rate improved to 7.4 percent, slow Canal traffic, protests, and the ernance and transparency. These include and support from the NPPS contributed modification of the anti-money launder- to a decline in the poverty rate (US$6.85/ subsequent closure of Cobre Panama, day per capita 2017 PPP) from 14.0 per- ing and counter-terrorism financing which are likely to affect inclusive (AML/CFT) prevention regulation and cent in 2022 to 12.9 percent in 2023. How- growth during the forecasting period. significant improvements in beneficial ever, poverty increased in rural areas FIGURE 1 Panama / Total, food and transport inflation FIGURE 2 Panama / Actual and projected poverty rates and real GDP per capita Percent change, y/y Poverty rate (%) Real GDP per capita (constant LCU) 25 35 14000 Food prices 20 30 12000 Transportation prices 15 25 10000 CPI 10 20 8000 5 15 6000 0 10 4000 -5 5 2000 -10 0 0 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 -15 International poverty rate Lower middle-income pov. rate Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 Jan-23 Jul-23 Jan-24 Upper middle-income pov. rate Real GDP pc Source: Instituto Nacional de Estadística y Censo. Source: World Bank. Notes: see Table 2. MPO 44 Apr 24 from 29.3 to 32.3 percent during the same subsidies), and improvements in tax ad- period as the sluggish recovery of non- ministration. Public debt is forecast to agricultural labor markets in these areas Outlook peak at 59 percent in 2024 and gradually failed to offset the gradual withdrawal of decline to 57.7 percent by 2026 (Table 2). NPPS support. Growth is expected to sharply decline in The current account deficit is projected to Despite the challenging events of 2023, 2024 to 2.5 percent as copper production narrow gradually to 4.7 percent of GDP both the fiscal and primary deficit saw comes to a halt; however, the dynamism in by 2026. Merchandise exports are expect- marginal declines to 3.8 percent and 1.7 the services sector should help gradually ed to remain subdued while service ex- percent of GDP, respectively. This was lift growth over the medium term. Poverty ports continue to be robust, supported attributed to restrained government rates (US$6.85 a day per capita, 2017 PPP) by air transport, logistics, and tourism. spending and an increase in tax and non- are projected to increase by almost 0.5 per- FDI is estimated to recover gradually to tax revenue. Notably, revenue included centage points in 2024 due to the anticipat- 3.8 percent by 2026, continuing to finance US$576 million in royalties and taxes ed discontinuation of the NPPS and slow- most of the current account deficit, sup- from the copper mine, US$500 million er growth. However, GDP growth is ex- plemented by portfolio investment and from the sale of land to the Panama pected to accelerate from 2025 onwards as public sector financing. International re- Canal Authority, and an increase in the Panama maintains its appeal as an attrac- serves are expected to stay around 13 per- efficiency of tax collection due to digital tive investment destination. Consequent- cent of GDP during 2024-2026. tax platforms. The current account deficit ly, poverty is expected to start decreasing Despite the downward pressure on the is estimated to have increased to 4.9 per- modestly in 2025 as the economy recovers sovereign ratings of Panama following the cent, as a result of a decline in copper and the labor market regains its pre-pan- closure of Cobre Panama, the country still and service exports, an increase in the demic dynamism. Inflation is expected to has good access to capital markets as a dol- imports of the Colon Free Trade Zone, stabilize at 2 percent. larized economy with a stable macroeco- and outflows of primary and secondary The overall and primary deficits are ex- nomic environment and investment grade. income. FDI is expected to experience a pected to widen to 4.3 and 2.1 percent This outlook is subject to several risks. The modest decrease from 3.8 percent in 2022 in 2024, respectively, impacted by lower next administration will need to tackle im- to 3.5 percent in 2023, indicative of a revenues and higher expenditure, before portant structural fiscal challenges and potential decline in investor confidence gradually declining to 3.7 and 1.5 percent make progress in adapting to changing cli- following the decision of the Supreme of GDP by 2026. This fiscal consolidation mate, such as increased frequency and in- Court to declare Cobre Panama's contract process relies on further containing tensity of hurricanes and droughts that as unconstitutional. spending (including the phasing out of could affect water levels in the canal. TABLE 2 Panama / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 15.8 10.8 6.5 2.5 3.5 4.0 Private consumption 10.8 7.1 7.4 2.3 2.4 2.7 Government consumption 9.8 7.8 10.7 4.7 4.7 6.1 Gross fixed capital investment 45.1 7.3 8.3 4.6 4.0 3.7 Exports, goods and services 14.9 16.0 17.0 0.1 3.4 4.0 Imports, goods and services 17.0 23.7 20.3 2.1 2.3 2.3 Real GDP growth, at constant factor prices 15.7 10.7 6.5 2.5 3.5 4.0 Agriculture 4.7 5.2 2.0 1.5 1.4 1.3 Industry 30.2 12.3 10.8 -2.8 -1.2 0.7 Services 11.7 10.4 5.2 4.5 5.2 5.2 Inflation (consumer price index) 1.6 2.9 1.5 1.5 2.0 2.0 Current account balance (% of GDP) -1.4 -4.0 -4.9 -6.1 -5.7 -4.7 Net foreign direct investment inflow (% of GDP) 2.0 3.8 3.5 3.4 3.8 3.8 Fiscal balance (% of GDP) -6.4 -4.0 -3.8 -4.3 -3.8 -3.7 Revenues (% of GDP) 17.3 17.4 17.6 17.3 17.8 18.0 Debt (% of GDP) 60.1 57.9 57.5 59.0 58.4 57.7 Primary balance (% of GDP) -4.2 -2.3 -1.7 -2.1 -1.6 -1.5 a,b International poverty rate ($2.15 in 2017 PPP) 1.1 .. 1.3 1.4 1.4 1.3 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 4.3 .. 4.4 4.8 4.7 4.7 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 12.9 .. 12.9 13.3 13.2 13.1 GHG emissions growth (mtCO2e) -1.0 7.2 35.2 -0.1 0.9 2.4 Energy related GHG emissions (% of total) 43.8 46.7 60.0 59.4 59.1 60.0 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SEDLAC harmonization, using 2023-EH. Actual data: 2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 45 Apr 24 A capable state that enforces the rule of law and property rights, and that delivers PARAGUAY Key conditions and good quality public services is crucial to drive these transformations. Paraguay has challenges initiated several reforms to improve public sector efficiency and recently inched closer Table 1 2023 Paraguay is a small, landlocked economy to investment grade. Advancing these re- a 6.8 Population, million and a major exporter of agriculture, live- forms is not only important for invest- GDP, current US$ billion 43.0 stock, and hydropower. As 80 percent of ment, but to ensure that growth translates GDP per capita, current US$ 6335.6 direct exports and at least 17 percent of into meaningful increases in labor in- b 1.3 International poverty rate ($2.15) output rely on these sectors, it is vulner- comes, especially for the poorest 40 per- b 5.6 able to fluctuations in commodity prices cent of the population. Lower middle-income poverty rate ($3.65) b 19.9 and weather conditions. Sound macroeco- Upper middle-income poverty rate ($6.85) Gini index b 45.1 nomic management has attenuated the im- School enrollment, primary (% gross) c 93.2 pact of external shocks, but these have con- Life expectancy at birth, years c 70.3 tributed to slower growth and poverty re- Recent developments duction over the past decade. An estimat- Total GHG emissions (mtCO2e) 98.3 ed 19 percent of Paraguayans lived below In the first nine months of 2023, favorable Source: WDI, Macro Poverty Outlook, and official data. the international poverty line for upper weather conditions boosted agriculture a/ Does not reflect preliminary 2022 Census results. b/ Most recent value (2022), 2017 PPPs. middle-income countries (US$6.85 per per- and hydropower production, leading to a c/ WDI for School enrollment (2022); Life expectancy son per day in 2017 PPP) in 2023, only 5 4.7 percent y-o-y increase in real GDP. Ex- (2021). percentage points lower than in 2013. In- ports more than compensated for the neg- equality remains high at 45 Gini points, re- ative effects of inventory destocking and flecting disparities in human capital. subdued investment, which was affected Paraguay’s economy is expected to grow by More durable and inclusive growth is by tighter monetary and fiscal policies. The 3.8 percent in 2024 assuming normal possible if Paraguay engenders three recovery began to slow in Q4 2023. The weather conditions, while poverty is pro- transformations. One, enhancing the qual- monthly index of economic activity ex- ity and level of public spending on in- panded by only 0.3 percent on a quarter- jected to decline to 18.6 percent. Strength- frastructure, human capital, and climate on-quarter basis, seasonally adjusted, and ening the business environment, boosting adaptation could accelerate structural annualized basis. productivity, and building resilience to transformation, create more formal jobs, The goods trade balance recorded a sur- shocks would help accelerate growth and and reduce Paraguay’s vulnerability to plus of US$1.6 billion (an estimated 1.4 poverty reduction through more formal climate change. Two, improving the regu- percent of GDP) in 2023 with exports latory environment for private investment increasing 24.7 percent y-o-y. Soybean job creation. Improvements in gover- and supporting the entry, growth, and ex- exports’ nominal value surged by 179 nance, including of natural resources, it of firms could help boost productivity, percent due to record volumes, despite and continued progress on human capital and ultimately formal employment and lower prices. The value of hydropower and infrastructure could attract more pri- wage growth. Three, Paraguay could har- exports decreased slightly by 6.5 percent ness its abundance of hydropower to de- year-on-year, reflecting reduced prices vate capital to Paraguay. carbonize its economy. in energy exports. Import growth was FIGURE 1 Paraguay / Fiscal expenditures as a share of GDP FIGURE 2 Paraguay / Actual and projected poverty rates and real GDP per capita Percent of GDP, average Poverty rate (%) Real GDP per capita (constant million LCU) 18 45 40.0 16 2.9 1.8 40 35.0 14 1.0 1.7 35 2.0 30.0 0.4 30 12 25.0 10 25 20.0 8 20 15.0 13.4 13.5 15 6 12.4 10 10.0 4 5 5.0 2 0 0.0 0 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2013-2017 2018-2022 2023-2026 (forecast) International poverty rate Lower middle-income pov. rate Total primary expenditures Interest payments Capital spending Upper middle-income pov. rate Real GDP pc Sources: Ministry of Economy and Finance and World Bank staff calculations. Source: World Bank. Notes: see Table 2. MPO 46 Apr 24 modest at 3.1 percent as fuel and construc- sovereign bonds for the first time in have formal jobs, a lower share than tion imports fell, and as global fuel prices February 2024, along with US$500 mil- most countries in the region. stabilized. The Guaraní depreciated mar- lion in USD-denominated bonds. Growth is expected to moderate slightly ginally (-0.5 percent) against the US dollar Labor market conditions in rural areas to 3.6 percent in 2025-2026 as fiscal con- in nominal terms. The financial sector re- improved, but the national unemploy- solidation intensifies towards the legal mains sound and total reserves were at 9.9 ment rate remained at 6 percent as urban limit of 1.5 percent of GDP in 2026. Of- months of goods and services imports at unemployment increased slightly. Pover- ficial estimates suggest substantial cuts the end of February. ty is estimated to have declined from 20 in personnel and capital spending to Headline inflation fell to 2.9 percent y-o- percent in 2022 to 19 percent in 2023, but achieve this consolidation, which indi- y in February from 3.4 percent in Janu- 35 percent of the population remains vul- cates slower government consumption ary, well within the target range of 2-6 nerable to poverty. and investment growth. percent. Core inflation fell from 4.7 to 4.6 The current account is expected to shift percent but remained above the midpoint. into a small deficit over the forecast The Central Bank continued to cut rates horizon as import growth, particularly in January and February 2024 by a cumu- Outlook of machinery and capital goods, accel- lative 50 basis points, bringing the policy erates along with the implementation of rate to 6 percent. The economy is forecasted to grow by investment projects. The fiscal deficit for 2023 was 4.1 per- 3.8 percent in 2024, assuming no major The outlook is subject to several down- cent of GDP, 1.8 percentage points high- weather disruptions. Fixed investment side risks. Heightened global uncertain- er than the original target, primarily growth is anticipated to accelerate, dri- ty or unexpected inflation could lead in- due to the settlement of government ar- ven by progress on greenfield private terest rates to remain higher for longer rears of approximately US$600 million investments (estimated at around 10 than projected, dampening private in- (around 1.1 percent of GDP), higher- percent of GDP) in pulp, biofuels, and vestment. Weaker than expected growth than-expected interest payments and so- green hydrogen as financing conditions in trading partners could affect the de- cial transfers, as well as lower corporate improve. Private consumption growth is mand for Paraguay’s commodities. income tax receipts due to the 2022 likely to accelerate as average inflation Weather shocks could affect agriculture drought. Public debt rose to an estimat- remains within the target range. Dri- and construction activity, potentially im- ed 38.2 percent of GDP, mostly denomi- ven by growth, poverty is expected to pacting poverty rates. On the other nated in foreign currency. To reduce its decline to 18.6 percent in 2024. Faster hand, faster progress on private invest- FX exposure, Paraguay successfully is- progress is limited by the fact that only ment projects and structural reforms sued US$500 million in Guaraní-indexed around three out of every ten workers could accelerate growth. TABLE 2 Paraguay / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 4.0 0.2 4.6 3.8 3.6 3.6 Private consumption 6.1 2.3 2.5 3.3 3.3 3.3 Government consumption 2.6 -2.2 3.2 1.0 0.2 0.2 Gross fixed capital investment 18.2 -1.8 -5.1 2.4 4.4 5.8 Exports, goods and services 2.1 -1.1 26.6 4.0 4.0 4.0 Imports, goods and services 21.8 9.4 7.5 1.2 2.5 3.3 Real GDP growth, at constant factor prices 3.6 0.1 4.8 3.8 3.6 3.6 Agriculture -11.6 -8.6 19.8 5.0 5.0 5.0 Industry 5.0 0.7 2.0 2.5 2.5 2.5 Services 6.5 1.5 3.8 4.4 4.1 3.9 Inflation (consumer price index) 4.8 9.8 4.6 4.0 4.0 4.0 Current account balance (% of GDP) -0.9 -7.1 0.3 0.2 -0.1 -0.4 Net foreign direct investment inflow (% of GDP) 0.2 1.7 1.5 1.7 1.7 1.7 Fiscal balance (% of GDP) -3.6 -2.9 -4.1 -2.6 -1.9 -1.5 Revenues (% of GDP) 13.7 14.0 14.0 13.9 13.7 13.7 Debt (% of GDP) 34.1 35.9 38.2 38.8 37.6 36.8 Primary balance (% of GDP) -2.5 -1.7 -2.5 -0.8 -0.1 0.1 a,b International poverty rate ($2.15 in 2017 PPP) 0.7 1.3 1.2 1.2 1.2 1.2 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 4.1 5.6 5.4 5.2 5.0 5.1 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 20.8 19.9 19.1 18.6 18.5 18.2 GHG emissions growth (mtCO2e) 0.7 -0.6 1.0 1.5 1.3 1.3 Energy related GHG emissions (% of total) 9.0 9.1 9.5 9.8 10.2 10.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SEDLAC harmonization, using 2022-EPH. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 47 Apr 24 is crucial to achieve higher growth that combats poverty and inequality. PERU Key conditions and challenges Table 1 2023 Recent developments Peru has recently concluded a decade of Population, million 34.4 low growth (2014-2023), marked by limit- In 2023, real GDP shrank by 0.6 percent, GDP, current US$ billion 267.6 ed advancements in creating quality jobs impacted by adverse weather, social un- GDP per capita, current US$ 7789.3 and reducing poverty. This contrasts rest, and faltering business confidence. El a 2.7 International poverty rate ($2.15) sharply with the preceding decade Niño and road blockades disrupted pro- a 9.5 (2004-2013), which saw rapid growth and duction in several regions, particularly in Lower middle-income poverty rate ($3.65) a 32.2 consistent poverty reduction, fueled by agriculture, fishing, and related manufac- Upper middle-income poverty rate ($6.85) Gini index a 40.3 capital accumulation and productivity turing sectors. The mining sector, buoyed School enrollment, primary (% gross) b 107.7 gains underpinned by sound macroeco- by the Quellaveco mine, grew by 9.5 per- b 72.4 nomic policies and favorable terms of cent, while the service sector saw a modest Life expectancy at birth, years trade. The macroeconomic environment is 0.6 percent growth. Domestic demand fell Total GHG emissions (mtCO2e) 183.2 characterized by low public debt, ample primarily due to weaker private invest- Source: WDI, Macro Poverty Outlook, and official data. international reserves, and a credible cen- ment and consumption, stymied by low a/ Most recent value (2022), 2017 PPPs. b/ WDI for School enrollment (2022); Life expectancy tral bank and the financial system is well- business and consumer confidence, Chi- (2021). capitalized and resilient to liquidity na’s economic slowdown, tight financial shocks. However, the economy is suscepti- conditions, and high inflation. The reces- ble to commodity price fluctuations due to sion in 2023 adversely affected the labor its reliance on mineral exports. Additional- market, with employment dropping by 0.9 GDP growth is expected to be 2.7 percent ly, Peru’s vulnerability to climate change is percent, especially in small firms. Real high due to its exposure to natural hazards wages rose by 3.5 percent but did not reach in 2024, following a contraction in 2023 and dependence on glacial freshwater. pre-pandemic levels. The share of people due to adverse climatic events, social un- Structural constraints, such as subpar ser- living under the US$6.85 poverty line is rest, and weak business confidence. vices and infrastructure quality limit for- estimated to have slightly risen to 33.8 in Poverty is projected to decrease slightly to mal job creation, economic diversification, 2023, due to stagnant job quality and pro- and the pace of poverty and inequality re- ductivity. Inequality is believed to have in- 33.2 percent in 2024. Risks include the duction. By 2022, 32 percent of Peruvians creased with the Gini coefficient rising potential intensification of El Niño and lived on less than US$ 6.85 per capita per from 40.3 to 41.4. political uncertainty. Overcoming struc- day, largely due to low-paying jobs and The fiscal deficit widened to 2.8 percent of tural challenges related to low-productiv- insufficient social protection. Furthermore, GDP in 2023, exceeding the fiscal target by ity jobs and low-quality public services is food insecurity affected half of the popu- 0.4 percentage points. This marks the first lation, a twofold increase since the pan- time in 22 years that Peru has failed to ac- critical to boosting long-term growth and complish its fiscal rule. Government rev- demic. Enhancing the quality of public ser- poverty reduction. vices, governance, and the business envi- enues dropped by 2.3 percentage points of ronment while ensuring political stability GDP from 2022, due to reduced corporate FIGURE 1 Peru / Real GDP growth and contributions to real FIGURE 2 Peru / Actual and projected poverty rates and real GDP growth GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 25 60 20000 20 18000 15 50 16000 10 14000 40 5 12000 0 30 10000 -5 8000 20 -10 6000 4000 -15 10 2000 -20 2019 2020 2021 2022 2023 2024f 2025f 2026f 0 0 Private Consumption Government Consumption 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 International poverty rate Lower middle-income pov. rate Gross Investment Exports Imports GDP Upper middle-income pov. rate Real GDP pc Sources: BCRP and World Bank staff calculations. Source: World Bank. Notes: see Table 2. MPO 48 Apr 24 income and value-added tax collections, would postpone the return to the one-per- reflecting lower mining prices and sub- cent target in 2026. Public debt is projected dued economic activity. Expenditures de- Outlook to remain stable at around 34 percent of creased by 1.1 percentage points of GDP, GDP. Annual inflation will remain within reflecting the phasing out of emergency GDP growth is projected at 2.7 percent the target range of 1-3 percent in 2024, sup- COVID-19 spending. Public debt (32.4 per- for 2024 as the negative shocks of 2023 ported by the easing of output shocks and cent of GDP) and sovereign spreads (at subside. Monetary easing should bolster moderate domestic demand growth. Infla- around 170 basis points) remained among private spending. Public spending is an- tion expectations would remain within the the lowest in the region. ticipated to aid recovery, especially with target range. The Central Bank is expected Inflation decreased through 2023, reaching improved execution of capital expendi- to reduce the interest rate further until it 3.0 percent by January 2024, within the ture at the subnational level in the sec- converges to its natural rate of 2 percent. Central Bank’s target band (1-3 percent). ond year of their mandate. Potential The current account deficit is anticipated to Core inflation, excluding food and energy growth is likely to stay at pre-pandemic widen slightly due to increased import val- prices, was at 2.9 percent. Inflation expec- levels due to ongoing institutional risks ues and higher expected profits from FDI as tations remained anchored at 2.6 percent, and China’s decelerating growth, Peru's domestic demand recovers. FDI inflows are supported by the Central Bank’s tighten- main trading partner. Over the medium expected to remain above 2 percent of GDP ing measures and falling global fuel prices. term, GDP is expected to grow at an an- as some medium-size projects (Zafranal, The Central Bank reduced its reference nual rate of 2.4 percent, primarily sup- Antamina reposition, Taromocho expan- policy rate, from 7.75 percent in August ported by exports from new mine pro- sion phase II) enter their execution phase. 2023 to 6.25 percent in January. jects (Quellaveco, Toromocho expansion). Domestic and external risks persist. Do- The current account closed 2023 with a The fiscal deficit is expected to narrow mestically, continued political uncertainty 0.6 percent surplus in 2023, attributed to to 2.4 percent in 2024 due to a revenue could undermine private investment and reduced import values and a smaller pri- recovery, which is supported by strong exports. A stronger-than-expected El Niño mary income deficit amid declining im- domestic demand, supportive mining could further impact agriculture and fish- port prices and a contraction in domestic prices and reforms of the tax admin- ing. A delayed decrease in inflation could demand. The local currency appreciated istration. The deficit will, however, re- postpone the easing of financial conditions by nearly 2.6 percent over the year, mir- main above the fiscal target due to and the revival of domestic demand. Ex- roring the global decline of the dollar. spending pressures from increased pub- ternal risks include lower-than-anticipated Net international reserves amounted to lic salaries and improved budget exe- growth in China, a more rapid global eco- 26.5 percent of GDP in 2023, up from 29.3 cution of subnational governments. Fis- nomic slowdown, falling commodity percent in 2022, due to higher FX sales cal consolidation will continue in the prices, rising interest rates, and escalating operations with the public sector. coming years, however, the slower path climate change threats. TABLE 2 Peru / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 13.4 2.7 -0.6 2.7 2.4 2.4 Private consumption 12.5 3.6 0.1 2.6 2.3 2.3 Government consumption 5.0 -0.2 3.2 2.0 2.0 2.0 Gross fixed capital investment 37.3 1.7 -12.5 11.3 2.8 2.8 Exports, goods and services 14.4 4.5 5.1 3.5 3.2 3.2 Imports, goods and services 25.6 4.0 -1.8 2.5 3.1 3.1 Real GDP growth, at constant factor prices 13.1 2.8 -0.4 2.7 2.4 2.4 Agriculture 5.3 3.1 -3.9 3.7 3.0 2.4 Industry 17.2 1.5 -1.3 2.7 2.1 2.1 Services 11.5 3.5 0.6 2.6 2.6 2.6 Inflation (consumer price index) 4.0 7.9 6.3 2.6 2.3 2.3 Current account balance (% of GDP) -2.2 -4.0 0.6 -1.3 -1.2 -1.2 Net foreign direct investment inflow (% of GDP) 2.5 4.6 1.0 2.6 2.5 2.5 Fiscal balance (% of GDP) -2.5 -1.7 -2.8 -2.4 -2.0 -1.5 Revenues (% of GDP) 21.1 21.8 19.8 20.2 20.4 20.5 Debt (% of GDP) 35.9 33.8 32.9 33.5 33.8 33.8 Primary balance (% of GDP) -1.0 -0.1 -1.1 -0.8 -0.4 -0.1 a,b International poverty rate ($2.15 in 2017 PPP) 2.8 2.7 4.2 3.6 3.1 2.6 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 10.0 9.5 11.4 10.6 10.0 9.3 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 33.4 32.2 33.8 33.2 32.5 31.8 GHG emissions growth (mtCO2e) 2.0 0.8 -0.9 -0.5 -0.4 -0.4 Energy related GHG emissions (% of total) 25.4 25.8 24.9 24.2 23.8 23.3 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on SEDLAC harmonization, using 2022-ENAHO. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. b/ Projections using microsimulation methodology. MPO 49 Apr 24 additional reforms should be explored to reduce distortions and design a more pro- SAINT LUCIA Key conditions and gressive tax framework. Given the contin- ued high public debt level and Saint Lu- challenges cia’s vulnerability to external shocks, the country would benefit from a credible and Table 1 2023 Saint Lucia is highly dependent on tourism growth-friendly fiscal consolidation and Population, million 0.2 and was severely affected by the pandem- the implementation of a fiscal rule, which GDP, current US$ billion 2.5 ic, followed by increases in import prices should be complemented by selected re- GDP per capita, current US$ 13980.1 for food and fuel. These price increases put forms to unlock private sector growth. a 0.1 International poverty rate ($2.15) pressure on living costs, especially for the The financial sector remained stable and a 0.6 most vulnerable. Frequent natural disas- liquidity in the banking sector was sizable. Lower middle-income poverty rate ($3.65) a 8.4 ters and the effects of climate change cause Nonetheless, the build-up of non-perform- Upper middle-income poverty rate ($6.85) Gini index a 43.7 significant socioeconomic losses. As a ing loans and gaps in compliance with An- School enrollment, primary (% gross) b 103.7 small open economy, economic growth ti-Money Laundering/Countering the Fi- b 71.1 had been volatile and relatively low even nancing of Terrorism impeded credit inter- Life expectancy at birth, years before the pandemic, averaging 1.3 percent mediation. The pegged exchange rate un- Total GHG emissions (mtCO2e) 1.1 between 2010 and 2019. This was attrib- der the Eastern Caribbean Currency Union Source: WDI, Macro Poverty Outlook, and official data. utable to several factors such as natural helped maintain low inflation before the a/ Most recent value (2015), 2017 PPPs. b/ WDI for School enrollment (2022); Life expectancy disasters and the country’s reliance on pandemic and anchored price stability. (2021). tourism. Less than 1 in 10 Saint Lucians were poor in 2015 (latest available data, at $6.85 poverty line, 2017 Purchasing Pow- er Parity). Inequality was high, however, Recent developments Saint Lucia’s economy, heavily reliant on with a Gini index above 40. In line with slow growth, no meaningful reductions in Real output growth started to decelerate tourism and imports, was hit hard by the poverty are expected to have taken place in in 2023, as stayover tourism began to slow pandemic and price increases of imported the pre-pandemic period. However, pro- down in 2023 after a strong increase of 78.7 food and fuel. This resulted in soaring jections indicate that the pandemic-related percent in 2022. In 2023-Q3, stayover public debt and debt service, limiting the crisis and the subsequent surge in food tourism remained 12.4 and 20.6 percent be- and fuel prices increased poverty. low its 2022 and 2019 levels, respectively. available fiscal space to invest in develop- Pandemic-related spending, low revenues, The suspension of trade with the United ment projects. Price increases also slowed and sizeable public investment to support Kingdom, along with the unfavorable down the recovery of living standards growth led to a rapid rise in public debt weather conditions led to a decline in ba- coming out of the pandemic. Structural in 2020. Public debt is expected to stabilize nana and other agricultural exports in reforms supporting the private sector are over the medium term, but high debt ser- 2023. A labor market recovery - in con- vice limits the government’s space to fund junction with high growth - was reflected needed to rebuild fiscal buffers, create by the declining unemployment rate, from critical development projects in the near jobs, and enhance poverty reduction. term. The government has implemented 23.0 percent in 2021-Q2 to 17.5 percent in several revenue enhancing measures, but 2022-Q2, helping to bring down poverty. FIGURE 1 Saint Lucia / Key macroeconomic variables FIGURE 2 Saint Lucia / Actual and projected poverty rates and real GDP per capita Percent Percent Poverty rate (%) Real GDP per capita (constant LCU) 25 100 12 40000 20 90 35000 15 80 10 10 70 30000 8 5 60 25000 0 50 6 20000 -5 40 15000 -10 30 4 10000 -15 20 2 -20 10 5000 -25 0 0 0 2021 2022 2023 e 2024 e 2025f 2026f 2015 2017 2019 2021 2023 2025 PPG debt-to-GDP (rhs) Primary Balance (% of GDP) International poverty rate Lower middle-income pov. rate Real GDP Growth Upper middle-income pov. rate Real GDP pc Source: World Bank staff calculations. Source: World Bank. Notes: see Table 2. MPO 50 Apr 24 The current account deficit continued to terms of GDP, despite retroactive pay- an average of 1.4 percent over the medi- narrow to 0.8 percent in terms of GDP in ments related to the past triennial wage um term. The government has announced 2023 as the recovery in tourism outpaced negotiation, costing EC$40 million in several new tax policies including the higher costs of food and fuel imports. Re- FY22/23. Public sector debt increased health and citizen security levy and the mittances in 2023 are estimated to have from 62.2 percent of GDP in 2019 to 95.8 increase in cigarette excise tax. These are fallen slightly from 2022 and peak 2021 percent of GDP in 2020 as output plum- expected to boost annual revenues levels but are still above their pre-pandem- meted, and the fiscal deficit ballooned. By (EC$40.4 million) and have, at most, ic level. Foreign direct investments were 2023, a solid recovery and improvements mildly regressive distributional effects in 1.1 percent of GDP in 2023, owing to in- in the fiscal deficit reduced public debt to the short term. Medium-term total ex- creased investment in tourism-related sec- 73.6 percent of GDP. penditure projections are 1.2 percent low- tors, fully funding the current account er than the 10-year pre-pandemic deficit. International reserves increased to (2010-2019) average, with notable contain- 3.9 months of imports in 2023. ments of spending on government pur- Inflation started to slow in 2023 (3.7 Outlook chases. Interest payments are projected to percent) in tandem with global pro- remain stable at around 3.3 percent of jections and the moderating economic Real output growth is projected to moder- GDP over the projection period, reflected recovery. This eased pressure on food ate to 2.9 percent in 2024 and to slow fur- in the overall deficit. Public debt is pro- security, which had worsened in 2022 ther over the medium term. Investments jected to marginally increase to 75.8 per- as a result of the successive pandemic in major construction projects, such as the cent of GDP in 2025, as the government and food price shocks experienced in airport renovation and construction of sev- issues debt to finance infrastructure pro- the past few years. The financial sector eral major hotels, are expected to peak in jects, stabilizing in the medium term. showed signs of growth in deposits, 2024. Agriculture is expected to grow slug- Risks are tilted to the downside and in- though risks remain elevated. gishly over the medium term, as supply- clude: (i) delayed implementation of fiscal In 2023, the overall and primary fiscal bal- side constraints persist. Poverty is expect- consolidation measures; (ii) more pro- ances deteriorated slightly compared to ed to continue its downward trend in the found economic deceleration in the main their 2022 levels. This was driven by lower medium term. Inflationary pressures are tourism source countries; (iii) rising tax revenues, resulting from slower-than- expected to ease over the medium term. geopolitical tensions; (iv) tightening finan- anticipated tourist arrivals and economic The primary fiscal surplus is projected cial conditions; (v) natural disasters; and activity. The public wage bill decreased in to be 1.2 percent of GDP in 2024, with (vi) climate change. TABLE 2 Saint Lucia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 12.2 18.1 3.2 2.9 2.4 1.8 Real GDP growth, at constant factor prices 8.8 17.2 3.2 2.9 2.4 1.8 Agriculture 9.1 4.5 -8.7 0.5 0.9 0.9 Industry 9.3 1.7 4.5 3.6 2.6 2.6 Services 8.7 20.5 3.3 2.8 2.4 1.7 Inflation (consumer price index) 4.1 6.9 3.7 2.0 2.0 2.0 Current account balance (% of GDP) -7.1 -2.3 -0.8 -0.4 -0.2 0.0 a Fiscal balance (% of GDP) -5.8 -1.2 -2.1 -2.1 -1.9 -1.9 a Revenues (% of GDP) 22.8 21.8 21.2 21.0 21.3 21.3 a,b Debt (% of GDP) 83.6 74.1 73.6 74.9 75.8 75.7 a Primary balance (% of GDP) -2.4 1.7 1.1 1.2 1.4 1.5 c,d International poverty rate ($2.15 in 2017 PPP) 0.1 0.0 0.0 0.0 0.0 0.0 c,d Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.9 0.4 0.4 0.4 0.4 0.4 c,d Upper middle-income poverty rate ($6.85 in 2017 PPP) 8.6 7.8 7.5 7.3 7.2 6.8 GHG emissions growth (mtCO2e) 19.6 22.1 7.4 6.1 5.3 4.5 Energy related GHG emissions (% of total) 71.6 70.3 68.5 66.5 64.5 62.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Fiscal balances are reported in fiscal years (April 1st -March 31st). b/ Public debt includes payables and overdrafts/Eastern Caribbean Central Bank advances. c/ Calculations based on CONLAC harmonization, using 2015-SLCHBS. Poverty estimates and projections shown here are not comparable to those shown in previous MPOs due to methodological changes. For details, see March/April 2024 Update to the Poverty and Inequality Platform (PIP) at https://pip. worldbank. org/publication. Actual data: 2015. Nowcast: 2016-2023. Forecasts are from 2024 to 2026. d/ Projection using neutral distribution (2015) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. MPO 51 Apr 24 tourism recovering and agriculture re- bounding post-volcanic eruptions, growth ST. VINCENT AND Key conditions and reached 6.5 percent in 2023 (7.2 percent in 2022), and is expected to remain strong at challenges THEGRENADINES 5.0 percent in 2024. The overall fiscal deficit remained signifi- St. Vincent and the Grenadines (SVG) is a cant at 6.2 percent of GDP in 2023, follow- small island developing state (SIDS) partic- ing a deficit of 7.0 percent in 2022, largely Table 1 2023 ularly vulnerable to climate change, exter- in response to the fiscal demands imposed Population, million 0.1 nal economic shocks, and natural disasters. by the volcanic eruption and exceptional GDP, current US$ billion 1.1 Prior to the pandemic, SVG was upgrading COVID-19 related expenditures. Direct fis- GDP per capita, current US$ 10305.1 essential infrastructure to support stronger cal spending measures in response to the School enrollment, primary (% gross) a 112.8 growth and economic diversification, in- volcano totaled 5.5 percent of GDP over a 69.6 cluding a new international airport, mod- 2021 and 2022. Furthermore, the govern- Life expectancy at birth, years ernization of the seaport, and construction ment took measures to cushion the impact Total GHG emissions (mtCO2e) 0.3 of a new hospital. In parallel, the govern- of rising food and fuel prices, including the Source: WDI, Macro Poverty Outlook, and official data. ment implemented fiscal consolidation expansion of existing social programs, sub- a/ Most recent WDI value (2021). measures, which generated primary sur- sidies on electricity, the provision of so- pluses from 2016 through 2019. The cial safety net payments to food-vulner- COVID-19 pandemic severely impacted the able households, and agricultural incen- island, and in April 2021, a volcanic eruption tives. Total support across all of the above, Growth was strong in 2023, supported by displaced about 20 percent of the popula- on top of the volcano response, averaged a strong recovery in tourism, agricultural tion, compounding the impact of the US$20 million (2.5 percent of GDP) annu- production, and publicly financed large- COVID-19 shock. Both shocks disrupted the ally over the 2020-2023 period. This posed fiscal reform agenda leading to fiscal deficits challenges and several critical large in- scale infrastructure projects. The risk of and increases in public debt. The challenge vestment projects were delayed/slowed to debt distress remains high. Fiscal support will be to reduce fiscal deficits while direct- create the needed fiscal space, though measures in response to the pandemic, the ing limited fiscal resources toward high pri- these have now resumed. Port modern- volcanic eruption, and high food and fuel ority public investment projects. There is no ization (a 25 percent of GDP investment, up-to-date poverty data available but based of which 6.5 percent of GDP was dis- prices are being wound down, but the fis- on the latest data from 2008 and using the na- bursed in 2023) is in its peak spending cal responsibility framework remains sus- tional poverty line, 30.2 percent of the popu- phase. Public investment reached 9.8 per- pended. Poverty is expected to have re- lation is considered poor. cent of GDP in 2023 and is expected to mained above pre-pandemic levels. New be 11.3 percent in 2024. Fiscal rule targets investments should significantly boost have been suspended given the disrup- tions caused by the COVID-19 pandemic growth over the medium term as the gov- Recent developments and the volcanic eruption and are to be ernment rebuilds fiscal buffers given the reintroduced in 2025. island's exposure to external shocks. Tourism has rebounded and has essen- The current account deficit narrowed mar- tially returned to 2019 levels. With ginally largely as a result of higher tourism FIGURE 1 St. Vincent and the Grenadines / Overall and FIGURE 2 St. Vincent and the Grenadines / Public debt primary fiscal balances Percent of GDP Percent of GDP 4 100 90 2 80 0 70 60 -2 50 -4 40 -6 30 Overall Fiscal Balance 20 -8 Public Debt Primary Balance 10 Public External Debt -10 0 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Sources: Ministry of Finance and World Bank staff calculations. Sources: Ministry of Finance and World Bank staff calculations. MPO 52 Apr 24 arrivals, though imports for volcano recov- growth continues, a return to primary sur- ery efforts, port modernization, and food pluses is expected. Importantly, recently and fuel import costs, also rose. The CAD Outlook adopted pension reform measures will is financed largely by FDI, private inflows lengthen the sustainability of the pension (remittances), external borrowing on con- Growth is expected to continue strong at scheme to 2060. Previously, the pension cessional terms, and limited domestic fi- 5 percent in 2024 and 3.9 percent in 2025 scheme would have required fiscal support nancing. International reserves remain at as tourism continues to rebound. Poverty as early as 2026/27. Nonetheless, limiting the over 5 months of imports. is expected to follow a similar trajectory. deficit, given the uncertain global economic Public debt was 86.4 percent of GDP at Tourism growth over the medium term is environment, will require sound fiscal man- end-2023, of which external debt is 62.8 expected to be further facilitated by the agement, including continued revenue mo- percent. As a result, SVG remains at a high new airport and new hotel and resort fa- bilization measures. As the economy stabi- risk of debt distress. Debt is assessed as cilities. Inflation is expected to slow to 2.6 lizes and returns to a more traditional sustainable given the authorities’ fiscal percent in 2024 and return to more typical growth path, fiscal rule targets would need consolidation plans, which would ensure rates of around 2.0 percent thereafter. to be adjusted to reflect increased debt levels a drop in the public debt-to-GDP ratio The fiscal deficit will likely remain relatively and the Fiscal Responsibility Framework to under 60 percent of GDP by 2035, the high at 7.4 percent of GDP in 2024 due to would need to be fully operationalized. Pri- ECCU’s regional goal. Government gross public investment spending driven primari- mary fiscal surpluses beginning in 2026 financing needs are covered primarily by ly by the port modernization project and ho- should facilitate a reduction in public debt official external financing and by some tel construction. Public investment is ex- levels over the medium term. recourse to domestic financing through pected to peak at 11.3 percent of GDP in Forecasts are primarily subject to down- T-Bill and bond issuances. 2024, fall to 8.5 percent in 2025, and return to side risks given the uncertainty in global Annual inflation in 2023 was 4.3 percent, more typical levels of 4.5 to 5.0 percent in economic conditions, continuing global a decrease from 5.7 percent in 2022, and 2026. Recurrent spending on pandemic- and price pressures, heightened global geo-po- should continue to moderate in 2024. volcano-related activities have fallen and litical pressures, and the ever-present risk Rising food prices contributed the most the authorities have taken several steps to re- of natural disasters. The government’s to overall inflation over the past two build fiscal buffers, as the contingency fund commitment to adherence to the FRF years and food price levels remain el- was replenished following its usage after the should contribute to improving its finan- evated despite easing inflation. Food volcano. Prioritizing public investment by cial position, while replenishment of the prices are likely to pose a greater strain focusing on completing current port mod- contingencies fund and continued deposits on low-income households and increase ernization, hotels, and the new hospital pro- thereto should mitigate climate-related the likelihood of food insecurity. As of ject, while scaling back other projects, will and natural disaster risks. On the upside, May 2023, 30 percent of the population reduce public investment spending by up to continued strength in tourism and comple- was severely food insecure according to 7 percent of GDP by 2026. As revenues in- tion of the new port could boost growth the Food Insecurity Experience Scale. crease, tourism remains strong and as over the short to medium term. TABLE 2 St. Vincent and the Grenadines / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f a Real GDP growth, at constant market prices 0.8 7.2 6.5 5.0 3.9 3.7 a Real GDP growth, at constant factor prices -1.7 8.0 6.7 5.0 3.9 3.7 Agriculture -29.4 -6.2 7.5 2.5 2.1 2.0 Industry 6.1 7.9 5.9 3.7 2.1 2.1 Services -0.1 9.1 6.8 5.5 4.4 4.2 Inflation (consumer price index) 1.6 5.7 4.3 2.6 2.0 2.0 Current account balance (% of GDP) -22.6 -18.9 -17.5 -16.8 -13.4 -9.9 b Fiscal balance (% of GDP) -6.4 -7.0 -6.2 -7.4 -3.1 -1.1 Revenues (% of GDP) 32.9 28.1 29.5 29.7 29.7 29.6 b Debt (% of GDP) 89.9 86.1 86.4 88.1 86.3 82.6 b Primary balance (% of GDP) -3.8 -4.6 -3.8 -4.8 -0.5 1.4 GHG emissions growth (mtCO2e) 5.5 2.0 2.8 2.5 2.4 2.4 Energy related GHG emissions (% of total) 74.8 75.2 75.8 76.3 76.8 77.3 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Growth projections for 2021-23 remain sensitive to uncertainties surrounding the timing of the vaccine roll-out and the recovery in tourism. b/ Budget balances and public debt are for the central government. MPO 53 Apr 24 Suriname is susceptible to natural disas- ters (floods and droughts) due to irreg- SURINAME Key conditions and ular precipitation; water management is a high priority, especially in the more challenges vulnerable interior. Recent discoveries of several offshore oil deposits should im- Table 1 2023 Suriname has made progress with imple- prove Suriname’s economic prospects Population, million 0.6 menting a comprehensive macroeconomic over the medium term. A Final Invest- GDP, current US$ billion 3.8 stabilization program to reverse imbal- ment Decision by one of the major oil com- GDP per capita, current US$ 6069.2 ances built up over years of economic mis- panies is expected by the end of 2024, with a 1.1 International poverty rate ($2.15) management and the COVID-19 pandem- production starting in 2028. Unlocking a 4.2 ic. In mid-2020, the government adopted sustainable and inclusive economic Lower middle-income poverty rate ($3.65) a 17.5 a program to address debt sustainability, growth will require resolving significant Upper middle-income poverty rate ($6.85) Gini index a 39.2 improve monetary and exchange rate poli- governance and institutional challenges, School enrollment, primary (% gross) b 98.0 cies, promote financial sector stability, and strengthening fiscal management, improv- b 70.3 strengthen economic governance, support- ing public services including education Life expectancy at birth, years ed by an IMF Extended Fund Facility provision, and adapting to climate change. Total GHG emissions (mtCO2e) 13.7 (EFF). The program temporarily went off- Source: WDI, Macro Poverty Outlook, and official data. track in mid-2022 due to spending over- a/ Most recent value (2022), 2017 PPPs. b/ Most recent WDI value (2021). runs which triggered rapid currency de- preciation and accelerated already high in- Recent developments flation. However, the government subse- Successful debt restructuring and imple- quently reestablished policy discipline un- Output growth is estimated to have der revised EFF targets. moderated to 2.1 percent in 2023, from mentation of wide-reaching reforms un- Preliminary findings of a new poverty as- a 2.4 percent rebound in 2022. Services der a comprehensive macroeconomic sta- sessment indicate that in 2022, after years of and industry (manufacturing and con- bilization program has put Suriname on macroeconomic challenges, about 17.5 per- struction) led the expansion, supported a path to fiscal sustainability. Currency cent of the population lived below the World by recovery in agriculture. The monthly Bank’s upper middle-income poverty line of economic activity index increased by an stabilization and tight monetary policy US$6.85 (2017 PPP) per day. Inequality, as average of 0.3 percent (y-o-y) up to Au- are gradually reducing inflationary pres- measured by the Gini coefficient, was ap- gust 2023, driven by mining and some sures, improving the purchasing power proximately 38.9, not out of line with other of the more labor-intensive sectors like of households, particularly the most vul- countries in the region. About four in 10 transport and storage, construction, and nerable. Prospective offshore oil produc- Surinamese lived in multidimensional food and accommodation. poverty – a broader poverty measure high- The currency, which had depreciated tion is stimulating growth-enhancing lighting chronic illness, low levels of edu- sharply against the USD during the second investment. It will be critical to put a cation, limited ICT skills, and lack of access half of 2022, stabilized at around SRD 38/ good framework in place to manage the to medical insurance. Both monetary and USD in 2023Q4 as a result of tight mone- incoming oil wealth. multidimensional poverty are markedly tary policy. A decline in global commodi- higher in the country’s interior. ty prices helped boost the current account FIGURE 1 Suriname / Exchange rate and inflation FIGURE 2 Suriname / Actual and projected poverty rates and real GDP per capita SRD/USD Percent change, y/y Poverty rate (%) Real GDP per capita (constant LCU) 40 80 20 26500 70 18 26000 16 30 60 14 25500 50 12 25000 20 40 10 24500 8 30 6 24000 10 20 4 23500 10 2 0 23000 0 0 2022 2024 2026 Jan-21 Jun-21 Nov-21 Apr-22 Sep-22 Feb-23 Jul-23 Dec-23 International poverty rate Lower middle-income pov. rate Exchange rate CPI (rhs) Upper middle-income pov. rate Real GDP pc Source: Central Bank of Suriname. Source: World Bank. Notes: see Table 2. MPO 54 Apr 24 to an estimated 2.7 percent surplus in 2023, on social assistance increased to 2.8 per- monetary policy and as external inflation- edging up from 2.1 percent in 2022. Mining cent of GDP in 2023 (from 1.9 percent in ary pressures subside. exports underperformed but the EFF and 2022). To further improve social assistance The fiscal position is expected to continue other multilateral financing strengthened performance, the government seeks to ex- improving as the government completes reserves allowing gross international re- pand coverage, introduce digital pay- debt restructuring and ends fuel subsidies serves to increase to $1346 million in 2023, ments, and regularly update payment to parastatals. Gross financing needs will from $1194 million in 2022. Currency sta- amounts in line with inflation. decline until 2026, but external debt repay- bilization, along with easing global infla- Debt restructuring negotiations with most ment is expected to increase in the medium tionary pressures allowed domestic infla- official and private creditors have been to long term as grace periods on restruc- tion to moderate to 32.6 percent (y-o-y) by completed. Standard and Poor raised Suri- tured debt end. Continued implementa- December 2023. Nevertheless, higher infla- name’s credit rating to CCC+/C with a sta- tion of fiscal consolidation measures will tion in food and non-alcoholic beverages, ble outlook in December 2023 following create space to scale up social spending and transportation led to an erosion of the successful exchange with private bond- and support growth-enhancing infrastruc- purchasing power, especially among the holders. Adherence to prudent fiscal re- ture investments, including for climate poorest households. Financial sector indi- forms and policies under the EFF is critical adaptation. The 2024 budget foresees so- cators highlight chronic vulnerabilities in to entrench debt sustainability and im- cial assistance spending of 3.1 percent of the banking system related to capital ade- prove growth prospects. GDP which, combined with reduced price quacy and asset quality. pressure, could have important implica- Fiscal policy is focused on restoring debt tions for poverty reduction. sustainability while improving the quality Over the long term, earnings from off- of public spending and protecting vulnera- Outlook shore oil production will further increase ble persons through enhanced social assis- fiscal space for social programs and re- tance. The government achieved a prima- Real output growth in 2024 is projected to silient growth. However, increased re- ry surplus of 1.6 percent in 2023 following accelerate to 3.0 percent, driven by pub- liance on the oil sector raises Suriname’s a series of revenue and expenditure mea- lic investment spending in non-oil sectors. vulnerability to commodity price shocks, sures, including a phaseout of energy sub- Growth is expected to maintain momen- can lead to Dutch Disease, and has en- sidies, expanded VAT coverage of goods tum over the medium term despite fiscal vironmental consequences. Enhancing and services, and removal of unregistered consolidation, as private investment in in- macroeconomic institutions, governance, workers from public payrolls. These mea- frastructure for the oil and gas sector picks and human capital ahead of the oil wind- sures were coupled with increased cash up. Inflation is anticipated to significantly fall is critical to alleviating risks and cre- transfers to mitigate the impact of higher decelerate in 2024 and over the medium ating a foundation for efficient and equi- energy prices for the vulnerable. Spending term as the government maintains tight table management of oil revenues. TABLE 2 Suriname / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices -2.4 2.4 2.1 3.0 3.0 3.0 Real GDP growth, at constant factor prices -2.4 2.4 2.0 3.0 3.0 3.1 Agriculture -7.5 -1.6 3.5 1.6 1.9 1.9 Industry -10.9 3.1 0.5 3.5 2.8 3.0 Services 2.2 2.7 2.5 3.0 3.2 3.2 Inflation (consumer price index) 59.1 52.4 51.6 23.3 18.3 11.9 Current account balance (% of GDP) 5.3 2.1 2.7 2.4 0.7 1.0 Net foreign direct investment inflow (% of GDP) -3.7 0.1 -1.7 -0.3 0.3 0.4 a Fiscal balance (% of GDP) -6.4 -3.0 -0.9 -0.6 0.0 0.4 Revenues (% of GDP) 26.4 26.8 25.7 24.9 25.2 25.1 a Debt (% of GDP) 115.9 116.1 90.1 92.5 87.2 82.4 a Primary balance (% of GDP) -0.5 1.0 1.6 2.9 3.5 3.5 a,b International poverty rate ($2.15 in 2017 PPP) .. 1.1 1.1 1.1 1.1 1.0 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) .. 4.2 4.2 4.0 3.8 3.5 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) .. 17.5 17.5 17.4 16.9 16.1 GHG emissions growth (mtCO2e) -0.1 0.8 0.6 1.1 1.2 1.3 Energy related GHG emissions (% of total) 19.1 19.6 19.9 20.5 21.2 21.9 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Budget balances and public debt are for the central government. b/ Calculations based on SEDLAC harmonization, using 2022-SSLC. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. MPO 55 Apr 24 With strong institutional capital, con- sensus-based policymaking, and a social URUGUAY Key conditions and compact focused on equity, Uruguay is equipped to address these challenges. challenges The government has made progress in reducing chronically high inflation, en- Table 1 2023 Like other Latin American countries, acted parametric pension reforms, and Population, million 3.6 Uruguay’s growth has slowed over the continues to adhere to the fiscal rule. GDP, current US$ billion 72.8 past decade. Real GDP grew by an aver- Reforms to enhance productivity, com- GDP per capita, current US$ 20425.9 age of 4.9 percent annually between 2003 petitiveness, and labor market flexibility a 0.2 International poverty rate ($2.15) and 2015, but decelerated to an average would boost growth and the inclusion a 0.8 of 1 percent from 2015-2022, slower than of lagging groups. Lower middle-income poverty rate ($3.65) a 6.4 OECD economies. The poverty rate is the Upper middle-income poverty rate ($6.85) Gini index a 40.6 lowest in the region (6.4 percent in 2022 School enrollment, primary (% gross) b 108.0 under the international line of $6.85 per Life expectancy at birth, years b 75.4 day, 2017 PPP), but it is twice as high Recent developments among children and youth, and dispar- Total GHG emissions (mtCO2e) 34.5 ities in its incidence across regions and Real GDP contracted by 0.4 percent y-o- Source: WDI, Macro Poverty Outlook, and official data. race persist. Income inequality has in- y in 2023 as the drought caused a larg- a/ Most recent value (2022), 2017 PPPs. b/ Most recent WDI value (2021). creased from 39.7 in 2019 to 40.5 Gini er-than-expected downturn in agriculture points in 2022. production. Manufacturing and construc- The normalization of commodity prices, tion activity were also weak, affected by the COVID-19 pandemic, and adverse cli- the planned maintenance of an oil refin- matic shocks have contributed to the ery and the completion of a new pulp After experiencing a severe drought in growth slowdown. A severe drought mill, respectively. Activity began to re- 2023, Uruguay’s growth is expected to from October 2022 to August 2023 re- cover slowly in Q4 2023 as the drought rebound to 3.2 percent in 2024. Private sulted in losses of nearly US$2 billion subsided: the seasonally adjusted month- consumption should increase due to real or about 3 percent of GDP. However, ly GDP proxy rose by an average of 0.8 structural challenges also limit potential percent from the previous quarter. wage growth and stable inflation expecta- growth. Despite outperforming the region The current account deficit widened to tions. Positive labor market developments on the World Bank’s Human Capital In- US$3.6 billion (4-quarter rolling sum) in support poverty reduction, but further dex, Uruguay faces skills shortages due Q3 2023 or an estimated 5 percent of GDP expansion of the middle class would re- to high dropout and repetition rates, and from US$2.8 billion or 3.9 percent of GDP quire productivity growth. Risks to the uneven access to education. Integration at the end of 2022. The goods trade surplus into the global economy and competition shrank due to the drought-related 44 per- outlook include slower growth in global levels are lower than expected given cent fall in soy and beef exports, which trading partners, particularly China, and Uruguay’s per capita income level. The ag- could not be offset by a small increase in climate-related shocks. ing population and high exposure to cli- cellulose exports from the new mill. The mate-related shocks also pose challenges current account deficit was financed by to macro-fiscal and welfare dynamics. FDI, which doubled to US$4.1 billion in the FIGURE 1 Uruguay / Inflation and the inflation target range FIGURE 2 Uruguay / Actual and projected poverty rates and real GDP per capita Annual inflation (percent) Poverty rate (%) Real GDP per capita (constant LCU) 12 25 700000 11 600000 10 20 9 500000 8 15 400000 7 300000 6 10 Target 200000 5 Range 5 4 100000 3 0 0 2 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 International poverty rate Lower middle-income pov. rate Annual Inflation Two-year ahead inflation expectation Upper middle-income pov. rate Real GDP pc Sources: Central Bank of Uruguay and World Bank staff calculations. Source: World Bank. Notes: see Table 2. MPO 56 Apr 24 first three quarters of 2023 compared to the sustainability-linked bond maturing in and positive labor market outcomes, but same period in 2022. 2034, raising US$700 million at a coupon of only moderately as average inflation re- The Central Bank reduced policy rates 5.75 percent. Uruguay continues to enjoy mains at the upper end of the target range. by a cumulative 225 basis points in H2 the lowest sovereign spreads in the region. Private investment is also projected to re- 2023 as annual inflation remained within Labor incomes improved as average real cover as financing conditions improve. As the target range of 3-6 percent. The wages grew by 3.7 percent in 2023, with growth converges towards potential in Uruguayan peso depreciated 4.3 percent a larger increase in the public sector. The 2025-2026, poverty is expected to gradual- in nominal terms over the same period. national employment rate rose by 1 per- ly fall to 5.7 percent. In February 2024, headline inflation de- centage point to 58.1 percent. Sectors with The fiscal deficit is expected to decline celerated to 4.7 percent y-o-y from 5.1 the largest employment gains, such as con- gradually as the fiscal rule caps primary percent in January, while core inflation struction and manufacturing, have a sig- expenditures at potential economic remained at the midpoint of the target nificant composition of low-skilled work- growth. Revenues as a share of GDP are range. Policy rates stayed at 9 percent ers. These developments boosted per capi- expected to dip slightly as income tax cuts at end-February 2024. The financial sector ta household income especially in Monte- take effect, but a phasing out of drought- remains sound, with ample capital ade- video (4.1 percent, compared with 0.7 per- linked transfers and lower capital spend- quacy and low non-performing loan rates cent in the rest of the country). ing should support expenditure consolida- of 1.8 percent at end-January 2024. tion. Public sector debt is projected to de- The 2023 non-monetary public sector fiscal cline to around 60 percent of GDP. deficit reached 3.3 percent of estimated Weaker global demand, especially from GDP, 0.5 pp higher than in 2022. Lower Outlook China, could limit the magnitude of the re- non-personnel and capital spending par- covery. Global financial volatility is a risk tially offset the impact of slower direct tax The economy is forecasted to grow by 3.2 given high levels of dollarization, and revenue growth due to the drought, and percent in 2024. Assuming no extreme about half of public debt is denominated lower sales tax collections as more weather events, agricultural exports in foreign currency. Climate shocks could Uruguayans traveled to and shopped in should recover, while cellulose exports dampen exports and domestic incomes. Argentina. Gross public debt is estimated will increase, reflecting added capacity. Faster progress on reforms in education, to have increased to 63 percent of GDP. Private consumption is expected to tem- the labor market, and public sector effi- In November 2023, Uruguay reopened its porarily accelerate due to income tax cuts ciency could improve growth prospects. TABLE 2 Uruguay / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2021 2022 2023e 2024f 2025f 2026f Real GDP growth, at constant market prices 5.6 4.7 0.4 3.2 2.6 2.6 Private consumption 3.2 5.7 3.6 3.8 3.3 3.3 Government consumption 5.2 2.5 -0.2 0.5 0.8 0.3 Gross fixed capital investment 19.3 11.8 -7.0 4.0 2.6 2.6 Exports, goods and services 13.5 9.8 0.7 4.7 4.0 4.0 Imports, goods and services 17.9 12.4 6.0 5.0 4.5 4.5 Real GDP growth, at constant factor prices 5.3 4.5 0.4 3.2 2.6 2.6 Agriculture 13.2 -9.6 5.3 2.5 2.5 2.5 Industry 5.6 3.5 -3.8 4.0 1.8 1.8 Services 4.5 6.2 1.1 3.1 2.9 2.8 Inflation (consumer price index) 7.7 9.1 5.9 5.8 5.7 5.6 Current account balance (% of GDP) -2.5 -4.0 -4.4 -3.2 -2.9 -2.7 Net foreign direct investment inflow (% of GDP) 2.5 4.2 4.8 2.0 2.0 2.0 a Fiscal balance (% of GDP) -3.1 -2.8 -3.3 -3.1 -2.9 -2.7 Revenues (% of GDP) 29.2 29.6 30.0 29.3 29.2 29.2 Debt (% of GDP) 62.4 62.0 63.0 62.3 61.7 60.0 a Primary balance (% of GDP) -0.9 -0.6 -1.0 -0.7 -0.7 -0.6 b,c International poverty rate ($2.15 in 2017 PPP) 0.1 0.2 0.2 0.2 0.2 0.2 b,c Lower middle-income poverty rate ($3.65 in 2017 PPP) 0.8 0.8 0.9 0.9 0.9 0.9 b,c Upper middle-income poverty rate ($6.85 in 2017 PPP) 6.7 6.4 6.0 5.8 5.7 5.7 GHG emissions growth (mtCO2e) 2.6 0.6 -2.4 1.0 1.2 1.1 Energy related GHG emissions (% of total) 20.3 21.1 21.2 21.6 22.0 22.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Non-Financial Public Sector. Excluding revenues associated with the "cincuentones". b/ Calculations based on SEDLAC harmonization, using 2022-ECH. Actual data: 2022. Nowcast: 2023. Forecasts are from 2024 to 2026. c/ Projections using microsimulation methodology. MPO 57 Apr 24 Macro Poverty Outlook 04 / 2024