October 07, 2026
Economic growth across Latin America and the Caribbean is expected to remain modest in 2026, with regional GDP projected to expand by 2.2 per cent, broadly in line with the 2.4 per cent recorded in 2025. While the pace remains subdued, the outlook reflects a degree of resilience as countries continue to absorb external shocks and navigate a challenging global environment.
Beneath the regional average, however, performance remains uneven. Economies pursuing more credible and durable policy frameworks are generally seeing stronger growth, higher investment and greater market confidence. Commodity exporters have benefited from still-elevated prices, while manufacturing exporters have remained relatively resilient despite ongoing volatility in global trade policy.
By contrast, food- and energy-importing economies face a more difficult backdrop. This is particularly evident in parts of the Caribbean, where higher import costs are adding pressure to domestic prices at the same time that softer tourism demand is limiting an important source of foreign exchange and economic activity.
Across the wider region, elevated global uncertainty, limited fiscal space and persistently high real borrowing costs continue to weigh on private demand. These conditions are constraining investment and household spending, making it more difficult for economies to generate stronger and more broad-based growth.
Risks also remain tilted to the downside. Renewed energy price volatility could slow the disinflation process and keep central banks cautious about reducing interest rates, while the potential effects of El Niño could disrupt agricultural production and place additional upward pressure on food and energy prices.
Even so, the region’s modest growth outlook should not be viewed as a fixed limit on its economic potential. Stronger-performing economies have shown that better policy choices, improved institutions and greater investment can support higher growth even in the absence of a major commodity boom.
The more fundamental challenge is finding new sources of productivity. In this context, the rapid global expansion of artificial intelligence could offer an important opportunity for Latin America and the Caribbean to strengthen competitiveness and accelerate economic transformation.
However, the potential gains from AI are far from automatic. Digital access alone does not guarantee productive use, while the adoption of new technologies will not necessarily translate into higher aggregate productivity without complementary investment in skills, management practices and capital.
The region therefore faces a critical policy challenge. If AI is to become a genuine engine of growth rather than another source of inequality, countries will need to address long-standing structural weaknesses, including high informality, delayed capital modernisation and significant gaps in human and managerial capability.
Ultimately, the region’s growth prospects will depend not only on its ability to withstand external shocks, but also on whether it can convert technological change into sustained productivity gains and broader economic opportunity.
Source: (World Bank Group)
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