By: Staff Writer
March 6, 2026
The Inter-American Development Bank said in a recent report that growth in Latin America and the Caribbean (LAC) is projected at 2.1 percent for 2026.
The report, ““Resilience and Growth Prospects in a Shifting Global Economy,” also said: “Latin America and the Caribbean is projected to grow by 2.2 percent in 2025 and 2.1 percent in 2026—close to its long-run average.
“Growth performance varies across the region’s largest economies. Mexico has experienced the sharpest downward revision, with growth now expected at 0.5 percent in 2025, down from 1.2 percent projected in January 2025.
“By contrast, Argentina is rebounding strongly from recession, with growth projected at 4.3 percent in 2025, while Brazil’s annual growth is expected to have normalized at around 2.3 percent after several years of robust, above-expectation expansion.”
The bank also said labour markets in the region have sustained low unemployment, inflation has been largely contained, and investor confidence has improved, as reflected in historically low borrowing costs, with the median sovereign spread falling to 209 basis points at the end of 2025, down from 268 in 2019.
Despite these gains, growth remains insufficient to close income gaps, public-debt levels are high, and higher interest payments are placing increasing pressure on public finances and external accounts.
“Latin America and the Caribbean navigated global uncertainty with resilience, supported by fiscal and monetary frameworks that have helped contain inflation and sustain macroeconomic stability,” said Laura Alfaro Maykall, IDB chief economist and economic counselor. “Looking ahead, countries have to accelerate productivity-led growth, strengthen public finances, and seize new opportunities from digitalization, artificial intelligence, and the energy to raise living standards and build more resilient and inclusive economies.”
Labor-market conditions improved markedly in 2025, with unemployment rates falling in most countries between June 2024 and June 2025, and joblessness nearing its lowest levels in recent years. While women’s participation in the labor force has surged, growth remains constrained by modest productivity gains and demographic shifts that are slowing the expansion of the working-age population.
As a result, sustaining growth will increasingly depend on productivity gains and upgrading skills. Expanding access to digital training and supporting workers’ transitions into higher-productivity occupations will be essential as labor markets evolve. The report highlights skills related to artificial intelligence as the fastest-growing in the region, with job postings referencing AI rising sharply by mid-2025, to 7% of total vacancies.
Fiscal policy is entering a challenging phase, requiring urgent strengthening of fundamentals. Public debt remains above pre-2020 benchmarks, interest payments are rising, and fiscal consolidation has weakened. Average public debt in the region stands at 59% of GDP, with projections ranging between 57% and 66% of GDP by 2028 under baseline and stress scenarios. Among policy actions, the report highlights the potential of digitalization to boost tax collection when paired with credible enforcement strategies.
While inflation has largely returned to target across much of the region, higher global interest rates, shifting expectations, and the growing use of digital and foreign-currency assets are reshaping the monetary-policy landscape. The report emphasizes the importance of reaching a neutral monetary stance — neither stimulating nor restraining economic activity — while developing flexible tools to absorb external shocks.