Sunday, May 25, 2014

Employment , economic growth and poverty

Economic growth prospect for 2014 in Latin America economies has moved downward from those rates above 5% some few years ago(2010). The current forecast is to have a rate of economic growth of 2,7% this year, but depending upon the pace of normalization of monetary policy in the USA economy(tapering).If it follows a smooth path, Latin America economies may get the projected rate. Otherwise, growth rates for these economies may be even lower. The implications of this deceleration are twofold: a.- It will affect latest employment gains. In fact ECLAC estimates , it will be hard to get the level of unemployment of 2013 (6,2%),even at the optimistic expected rate of economic growth for 2014. Employment is the first step to solve poverty. b.- It will threat the progress made on key social indicators such as poverty level and , inequality, because the States will not have available the same amount of financial resources coming from commodities high prices and economic growth .- So what does it comes next? There are higher risks of populism, fiscal expenditure above the available means, important capital outflow , currency depreciation and a probability of a sudden stop . In some countries interest rates may moves up, in others may moves down, depending in each case of the expected inflation rate to move up or down as well. Besides, there are some concern about the chance of hard landing in the growth prospect in China, which would affect harder those economies with stronger commercial links whit that country. Therefore, there are troubled waters ahead (2015),although not necessarily out of control for these economies, which have important foreign currency reserves , low levels of debt / gdp ratio, and its financial sector is fully capable of supporting the economies requirements. Close to get half of the year away, the expectations for this year to be important in economic outcomes, look now weaker than at the beginning of 2014. The pace of economics and politics, are not always at the same speed. In fact, taking a deeper insight, the variety of alternatives and scenarios depend on this relationship. Those countries which politics have taken charge of economics ,are worse off than those ones in which politics get along well with economics.