The combined shock of higher commodity prices, lower growth rates in the Eurozone and the United States, and tighter-than-expected U.S. monetary policy would be a 1.5 percent reduction in average annual Gross Domestic Product (GDP) growth between 2022 and 2024 from the annual growth baseline of 2.2 percent.

This negative scenario foresees the more developed economies taking more aggressive measures to reduce inflation. This would cut regional GDP growth from 2.1 percent to 1.2 percent in 2022 and -0.4 percent in 2023. The region would then recover in 2024 to 1.3 percent growth, before converging back to long-term growth of around 2.5 percent.

The Russian invasion of Ukraine, along with rising interest rates, will likely reduce growth in Latin America and the Caribbean in 2022-2024, highlighting the urgency of adopting policies to boost higher and more inclusive growth in the region, says the Inter-American Development Bank's (IDB) Latin America and the Caribbean Macroeconomic Report 2022.

Growth scenarios for individual countries depend on a variety of factors, from their trade ties with Russia to their level of indebtedness. Overall, the combined effect of the global growth, commodity and financial sector shocks is a reduction in growth in Latin America and the Caribbean compared to the pre-war scenario, with the region expected to recover by the end of 2023 and in 2024.  

The combined shock of higher commodity prices, lower growth rates in the Eurozone and the United States, and tighter-than-expected U.S. monetary policy would be a 1.5 percent reduction in average annual GDP growth between 2022 and 2024 from the annual growth baseline of 2.2 percent.

This negative scenario envisions more developed economies taking more aggressive measures to reduce inflation. This would cut regional GDP growth from 2.1 percent to 1.2 percent in 2022 and -0.4 percent in 2023. The region would then recover to 1.3 percent growth in 2024, before converging back to long-term growth of around 2.5 percent.