The World Bank (WB) put Panama’s economic growth at 2.4 percent in 2024, while by 2025 it expects 3.0 percent and by 2026 a4.0 %, according to its latest published report on Thursday, called “Glothing taxes for equity and growth.”
Those leading the biggest growth by 2024 are: Guyana (43,0 %), Dominican Republic (5.1 per cent), Saint Vincent and the Grenadines (5.0 per cent) and Dominica (4.6 per cent).
The WB expects Latin America and the Caribbean to grow 1.9 percent in 2024 and 2.6 % by 2025. These are the lowest rates among all regions of the world, highlighting persistent structural obstacles.
He explained that the debt-to-GDP ratio climbed to 62.8 per cent in 2024, compared with 59.1 per cent in 2019, and high indebtedness and debt services continue, obstructing the region’s ability to create the fiscal space needed for spending and public investment.
Closing this gap is part of a broader development agenda, which the region must include in improvements for administrative capacity, spending and tax collection, the report warned.
The report also analyses different options that countries can explore in this context and delves into wealth taxes as an alternative to generate fiscal space, match incomes and stimulate growth.
He now describes that Latin America and the Caribbean have some of the highest taxes on the world’s highest corporations, with an average of 24.7 per cent, above the Organization for Economic Cooperation and Development (OECD) average of 23.9 per cent, and Asia’s average of 19.0 per cent.
However, he warned that the region collects only 2.7 per cent of its income through wealth taxes, compared with 12.8 per cent in North America and 4.3 per cent in Western and central Europe.
To accelerate growth, the bank argues that the region must take advantage of the current economic dynamics, as the decision of the US Federal Reserve to lower interest rates is expected to provide some relief.
He mentioned that inflation control was another positive step forward, thanks to the effective macroeconomic management of the countries of the region. Brazil and Peru are on track to meet their inflation targets by 2024, and other major economies are expected to follow soon after, he said.
The region has made progress in managing inflation and macroeconomic stabilization. This is a key moment to build on these achievements and attract the investments needed for sustainable development, promote innovation, build human capital, create more and better jobs and empower the region to free us from this cycle of low growth, said Carlos Felipe Jaramillo, Vice President of the World Bank for Latin America and the Caribbean.
The report highlights that public and private investment in Latin America and the Caribbean remains low, and that countries are not taking full advantage of the opportunities of nearshoring. In real terms, foreign direct investment (FDI) is at lower levels than 13 years ago, and announcements of new investments favour other regions. Despite having competitive wages compared to China and other destinations, high capital costs, weak education systems, poor energy and infrastructure and social instability reduce the region’s attractiveness as a destination for nearshoring.
William Maloney, chief economist of the WB for Latin America and the Caribbean, for his part, said that to seize the windows of opportunity that the region has in green transition and the trend of nearshoring requires extensive structural reforms to make the region more productive and competitive.
This, he added, will demand greater fiscal space, improve the effectiveness of the government, as well as reduce the tax burden on the productive sectors. This is a good time for the region to reconsider the best way for its tax systems to generate revenue and, at the same time, stimulate growth and promote equity.
This article has been translated after first appearing in La Estrella