World Bank trims Latin America growth estimate for 2026

By Brendan O'Boyle

MEXICO CITY, April 8 (Reuters) - The World Bank trimmed its estimate for economic growth in Latin America and the Caribbean for 2026, citing the region's long-standing structural challenges, compounded by high borrowing costs, weak external demand, geopolitical tensions and persistent inflation.

In its latest Latin America and the Caribbean Economic Update, published Wednesday, the World Bank forecast the region to grow 2.1%, below the 2.4% growth recorded in 2025 and lower than the 2.5% growth that the group forecast in October.

The report noted that private consumption remains the main driver of demand.

"The binding constraint is investment, which remains subdued as firms wait for clearer signals on the external environment and domestic policy frameworks," the report said. It highlighted Argentina as the regional exception, "as stabilization and reforms have improved expectations and financial conditions" in the region's third largest economy.

The World Bank forecast sluggish growth for the region's two largest economies for this year and next, pointing to "slower momentum amid tight domestic financial conditions, limited fiscal space, and trade policy uncertainty."

Gross domestic product (GDP) for the region's largest economy, Brazil, is forecast to grow 1.6% this year, before ticking up to 1.8% next year, the report said.

Growth in Mexico, where the ongoing review of Mexico's trade deal with the U.S. and Canada has fueled uncertainty and hit investment flows, is forecast at 1.3% in 2026, before rising to 1.7% next year.

On the upside, the region has significant untapped potential for future growth, the World Bank said, emphasizing that the region possesses roughly half of the world's lithium reserves, a third of its copper, a clean energy mix and ongoing reform efforts in several nations.

The report advises countries in the region against jumping straight to complex industrial policies to harness that potential. Instead, it urges governments to focus on "getting the basics right first," such as investing in skills, maintaining open economies and strengthening institutions to create an environment where businesses can thrive, ultimately creating quality jobs.