Every week, the WESP Weekly Highlights zoom in and explore the economic situation in a country or region across the globe. The latest trends in international reserves in Latin American and Caribbean countries in 2013 are highlighted in the most recent issue released by DESA’s Division for Development Policy and Analysis (DPAD).
The latest issue published on 23 December, reveals that the accumulation of international reserves in the Latin American and Caribbean region as a whole has sharply decreased in 2013. Argentina and Venezuela saw a drop of 20% in one year and Peru experienced a sharp reduction in the pace of its accumulation of reserves from $15 Billion in 2012 to $2.5 Billion in 2013. Many Caribbean countries including Barbados, Guyana, Jamaica are expected to see a drop in international reserves as 2013 comes full circle.
The issue also explores potential reasons for the sharp reductions in international reserves, such as increases in current account deficits and policy interventions in the foreign-exchange markets. For instance, Brazil launched a $60 billion intervention programme in the foreign-exchange market to contain depreciation pressures.
There may be significant risks for the region in 2014 and 2015 according to DPAD’s forecasts owing to the potential effects of the normalization of monetary conditions in developed countries. This could lead to a retrenchment of capital inflows, volatility in exchange rates and tighter financing conditions, which would markedly increase the pressure on international reserves. Governments will need to evaluate the appropriate measures to confront the potential effects.
Previous issues of the WESP Weekly Highlights have put spotlight on the potential effects of QE (Quantitative Easing) tapering on the United Republic of Tanzania, and policy challenges caused by the growth slowdown in South Africa. The growth rate in South Africa has slowed to 1.8 per cent in the 3rd quarter of 2013 compared to 2.2 per cent during the same quarter last year. The main reason behind the economic slowdown is the contraction in the manufacturing industry, which accounts for 15 per cent of GDP, making it the second largest sector in the economy.
Readers of the weekly WESP have also been updated on China’s comprehensive road map for guiding its overall institutional reforms in the next decade, which consist of economic, political, cultural, social and ecological reforms.
Access the WESP Weekly Highlights from DPAD’s website here.