From Trinidad and Tobago Newsday

Part 1 ECONOMIC Development Division of the Economic Commission for Latin America and the Caribbean (ECLAC) produces an annual publication. The latest publication of the Economic Survey of Latin America and the Caribbean was released on Friday 31 July 2015.

The survey contained the economic performance of the region as well as trends for the first half of 2015.

International events have had material bearing on the economic performance of Latin America and the Caribbean in 2014.

ECLAC reports that for 2014 the World’s economy grew at a modest rate of 2.6 percent and at this time forecasts suggest there may be a small improvement in 2015. The figures reported for global trade continue to exist below the levels that were recorded at the time of the financial crisis of 2008/2009.

In addition 2014 has also reflected the continuous decline in commodity prices such as energy, minerals, food, agricultural raw materials and forestry as a result of weaker demand for commodities.

This is especially relevant to Trinidad and Tobago as energy price, which is made up of crude oil, natural gas and coal declined by 52 percent in the seven months between July 2014 and January 2015. This fall in commodity prices has led to a fall in the terms of trade of those countries in the region that are commodity exporters. The change in commodity prices is also expected to affect the current accounts of Latin American countries sending most of them into further deficits.

The global economy is likely to exhibit volatility in the financial markets. This may be as a result of uncertainty about the timing and the magnitude of the increase in interest rates in the US, possible US dollar appreciation, impact of losses on the Chinese stock market, concerns over the stability of the euro, and the effectiveness of the monetary expansion in Europe and Japan. Such volatility is translated into a number of concerns for the region. Among these include increased costs of borrowing, weakening energy prices, lower resource inflows and even possible outflow of resources and an increase in exchange rate volatility with a possibility of depreciation of currencies.

The global economic conditions have had a direct impact on Latin America and the Caribbean economies as a whole with economic growth continuing its downward trend and registering 1.1 percent growth. This is expected to be even lower in 2015 with forecast as low as 0.5 percent.

It should be noted that the sub region of the Caribbean actually recorded an increase of 2.3 percent in 2014 from 2013.

This lower economic growth for Latin America and the Caribbean reflects a significant fall in consumption and gross capital formation both worrying signs, since consumption has been and continues to be one of the main contributors to growth. In the region gross capital formation has been in gradual decline since 2011, and in 2014, contracted by two percent.

In the first quarter of 2015, investment continued to slide, which had a negative impact of about 0.3 percentage points of GDP on growth in domestic demand. This is a concern since this investment pattern can have adverse impacts on the business cycle both for medium- and longterm growth.

Growth of consumption expenditure slowed from three percent in 2013 to 1.4 percent in 2014.

This was especially the case for private sector consumption which, in the same period, slowed sharply from 2.9 percent to 1.2 percent.

While remaining the most important driver of GDP growth, the contribution of private consumption fell from 1.9 percentage points to 0.8 percentage points in 2014.

The slowdown in economic activity for the region was not reflected in the unemployment data for 2014. If anything the unemployment rate actually fell slightly from 6.2 percent to six percent. However, preliminary data suggest that the continual decline in economic activity is affecting job creation and is expected to push the unemployment level in the region to 6.5 percent for 2015.

Although fiscal revenues showed a slight moderation in 2014 on 2013 figures, preliminary data for the first quarter of 2015 suggest that expenditures are out pacing revenues. In several Latin American and Caribbean countries as commodity prices fall fiscal revenues are expected to fall.

There are some signs of uptick in revenues in a few countries in the region due in part to fiscal reforms.

Although economic growth has slowed in Latin America and the Caribbean, debt to Gross Domestic Product (GDP) has remained relatively stable at 30 percent for 2014 and the first quarter of 2015. It should be noted that for the Caribbean the ratio is around 70 percent. The key to get economic growth in Latin America and the Caribbean going again is to boost both foreign and domestic investment.

Clear strategies for achieving this objective must be spelt out.

For more on this story go to: http://www.newsday.co.tt/businessday/0,215245.html