The World Bank has projected modest economic growth of 2.2 percent for Latin America and the Caribbean in 2026, a slight upward revision of 0.1 percentage points from its previous forecast. The multilateral development institution issued the forecast in its latest biannual Regional Economic Update, released Tuesday, while cautioning that several risks could undermine the region’s economic outlook.
Susana Cordeiro Guerra, the World Bank’s regional vice president, emphasized the region’s potential for stronger growth, highlighting the progress made by countries that have maintained sound macroeconomic policies, reinforced institutions, and pursued structural reforms. However, the bank also noted that downside risks remain prominent, particularly from external factors such as energy price volatility and adverse climatic events.
The ongoing conflict in the Middle East, marked by hostilities involving the United States, Israel, and Iran since late February, has exacerbated global energy market instability. Iran’s retaliatory strikes against U.S. regional allies and blockades of the Strait of Hormuz—a strategic chokepoint for oil and gas transit—have contributed to surging prices for petroleum, natural gas, and fertilizers. These developments pose inflationary pressures in Latin America and the Caribbean, prompting central banks in the region to maintain tighter monetary policies with higher interest rates to control inflation.
Additionally, the report highlights concerns over the intensifying El Niño climate phenomenon, which is anticipated to reach unprecedented levels this year. El Niño is associated with warming sea surface temperatures that disrupt global weather patterns, often leading to adverse impacts on agriculture and hydropower production. The World Bank warned that this climate event could further increase food and energy costs in the region, complicating the economic recovery.
Within the diverse set of economies, the World Bank identified El Salvador, Paraguay, Panama, and the Dominican Republic as notable examples of robust growth. Argentina has also been singled out for its ongoing recovery from a period of hyperinflation, with the economy expected to post three consecutive years of growth through 2027, a feat not seen in two decades.
In contrast, the region’s largest economies, Brazil and Mexico, are projected to expand at or below the regional average. Their growth is being held back by tight monetary policies aimed at reducing inflation, ongoing policy uncertainties, and a decline in public investment.
The World Bank’s update underscores a cautious optimism about the region’s economic prospects while acknowledging the significant external shocks and internal policy challenges that could influence growth trajectories in the coming year.