NEW YORK — Even with all the progress Latin America has made vaccinating its population against COVID-19 and commodities prices staying relatively high, the region will experience a much lower rate of economic growth next year vs 2021, according to economists at Barclays Plc.

With the region’s economy projected to recover 6.8% this year, the London-based bank is forecasting that its gross domestic product will expand only 2.4% in 2022 and 1.9% in 2023, as higher interest rates, the effects of rising cost of living as well as echoes of the global supply disruptions create “crosswinds” that will subdue its economic performance. The updated estimates represent a slight reduction compared with the 2.5% and 2.1% GDP growth forecasted previously for each year.

“Political noise and persistently high inflation that has fostered an acceleration in monetary policy normalization (also partly sparked by stimulus withdrawal in advanced economies) as well as likely continued global supply disruptions will restrain the upside risks to growth,” economists Pilar Tavella, Alejandro Arreaza, Roberto Secemski and Nestor Rodriguez wrote in a research report dated November 17.

Barclay’s growth forecast is however more optimistic than the 2% GDP expansion predicted by Goldman Sachs for 2022 in a report published November 9. At the same time, in its most recent regional economic outlook, the International Monetary Fund is projecting a 3% growth for next year as the region takes a “long and winding road to recovery.”

For Barclays, Latin America is also likely to benefit from some positive impact from the U.S. fiscal stimulus, “though expected monetary tightening across the region could put a brake on growth.” The region started in March a rate hiking cycle on the back of pesky rising prices of food and energy and even if the ex- ante real rates remain low across most of the subcontinent, “we expect central banks in Latin America to continue hiking throughout the first half of next year,” the analysts said in the 21-page report.

As the end of 2021 is around the corner, central banks will have a busy calendar to conclude the year. Brazil’s central bank will announce its monetary decision on December 8th, followed a day after by Peru’s BCRP. Five days before the expected second round of the presidential election in Chile, the BCCh will issue its monetary decision on December 14. Mexico’s Banxico and Colombia’s BanRep will follow on December 16 and 17 respectively.

Commodities Wind?

For years, an increase in the price of commodities meant more revenues for the region, but Barclays flags that for higher commodity prices to have a “positive growth effect” on Latin America’s economies, there needs to be an increase in commodity-related investments. “This seems unlikely at the moment, as political noise in the region, especially with regard to policy uncertainty regarding mining activities, will probably deter private sector investment in the commodity sector.”

Higher commodity prices could have a positive impact on the fiscal accounts of some countries, such as Mexico, Chile, Colombia and Ecuador, the analysts said in the report. Argentina might also be expected to benefit in such an environment, but this seems unlikely because soybean prices are not trading near 2020 highs.

“We think the most noticeable impact of high commodity prices on Latin America is likely to be rising inflationary pressures,” they assert.