Americas and Caribbean
North and South America have had very different economic development trajectories with the United States of America and Canada racing ahead, leaving the economies of the South much further behind. The Americas are then best looked at as consisting of the North American Free Trade Agreement (NAFTA) countries Mexico, USA and Canada on the one hand and South America on the other.
Although its share of global output is shrinking, the United States of America is still the world’s biggest economy. After the deepest financial crisis since the Great Depression, it is now back in recovery mode. Despite going through an extremely harsh winter in the beginning of 2014 that damaged its economy, performance has been very strong throughout the rest of last year. The labour market still has some way to go until full recovery: despite impressive increases in employment the share of the population that has given up looking for work remains at a record high and it is questionable how productive they will be once they re-join the labour force after years of inaction. Looking ahead the pace of growth is expected to cool slightly as the Federal Reserve raises interest rates from crisis-level lows. Over the medium term growth should remain robust – overall it is expected to average 2.6% in the period to 2019.
Further afield in NAFTA, Mexico is benefiting from the recovery in the US through increased demand for its exports. Growth in 2014 was strong and is expected to accelerate further in the coming years, helped by improvements in productivity through a weakening of the peso, the re-shoring of some manufacturing production from relatively more expensive places in Asia, and the implementation of reforms. Annual growth is forecast to average 4.0% until 2019 as a result. The other member-country, Canada, has seen its economic prospects harmed somewhat by falling oil prices. The recovery in its neighbouring US however should provide enough impetus for Canada’s exports and help sustain an average growth rate of 2.6% between 2015 and 2019.
The end of the commodity super-cycle and the falls in the price of oil have taken their toll on many of the economies of South America, especially those heavily dependent on mineral production such as Venezuela, Chile, and Brazil. The Brazilian economy is further held back by a lack of reforms, a monetary tightening cycle and weakness of the currency, and weak wage growth. As such the outlook for growth remains weaker compared to the rates seen in the beginning of the decade, with Brazil’s place in the championed “BRICS” group now in doubt.