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Latin America and the Caribbean will grow an estimated 2.1% in 2026, in line with its long-term average, according to the new macroeconomic report from the Inter-American Development Bank (IDB). The analysis highlights the resilience of the region's economies and concludes that accelerating inclusive growth will require solid macroeconomic frameworks and ambitious structural reforms, along with efforts to seize technological and commodity opportunities amid growing global risks.
The projection reflects a gradual slowdown compared to the 2.2% annual growth recorded in the region in 2025. According to the report "Resilience and Growth Prospects in a Changing Global Economy", the region's labor markets have maintained low levels of unemployment, inflation has been largely contained, and investor confidence has improved, as reflected by historically low borrowing costs. The median sovereign spread fell to 209 basis points at the end of 2025, compared to 268 points recorded in 2019.
Despite these advances, growth is still insufficient to close income gaps, public debt levels are high, and the increase in interest payments puts growing pressure on public finances and external accounts.
"Latin America and the Caribbean has navigated global uncertainty with resilience, supported by fiscal and monetary frameworks that have contributed to containing inflation and sustaining macroeconomic stability," noted Laura Alfaro Maykall, chief economist and economic advisor at the IDB. "Looking ahead, countries must accelerate productivity-driven growth, strengthen public finances, and seize the new opportunities offered by digitalization, artificial intelligence, and energy to raise living standards and build more resilient and inclusive economies."
Opportunity in critical minerals
The region is in a privileged position to convert rapid technological advances and global energy needs into engines of growth, the report highlights. Both trends heavily depend on critical minerals, of which the region possesses abundant reserves. An example is lithium: global demand is projected to increase between 470% and 800% by 2050. With almost half of the world's lithium resources, around 35% of global copper reserves and more than 20% of rare earth reserves, the region is well-positioned to become a strategic supplier in the value chains of the future. But the report warns that natural wealth does not guarantee sustainable development. Seizing the opportunity of critical minerals will require stronger institutions, predictable rules, reliable clean energy, robust environmental governance, and disciplined fiscal frameworks.Labor market improvements
Labor market conditions improved notably in 2025, with unemployment rates falling in most countries between June 2024 and June 2025, and unemployment approaching its lowest levels in recent years.
While female participation in the labor force has increased considerably, growth remains limited by modest productivity gains and demographic changes that are slowing the expansion of the working-age population. Consequently, sustaining growth will increasingly depend on productivity gains and skills improvement. Expanding access to digital training and supporting workers' transition to higher-productivity occupations will be essential as labor markets evolve. The report highlights artificial intelligence as the fastest-growing digital skill in the region. Job postings mentioning AI increased significantly towards mid-2025, reaching 7% of total vacancies. Fiscal policy is going through a challenging phase that demands an urgent strengthening of fiscal fundamentals. Public debt remains above pre-2020 levels, interest payments are increasing, and fiscal consolidation has weakened. Average public debt in the region stands at 59% of GDP, with projections ranging from 57% to 66% of GDP by 2028 in baseline and stress scenarios. Among policy measures, the report highlights the potential of digitalization to increase tax collection when combined with credible compliance strategies. While inflation has largely returned to its target in much of the region, higher global interest rates, changing expectations, and the increasing use of digital assets and foreign currency are reshaping the monetary policy landscape. The report emphasizes the importance of achieving a neutral monetary stance — one that neither stimulates nor restricts economic activity — while developing flexible tools to absorb external shocks. The report concludes that policies that promote greater competition, better skills training, deeper regional integration, and the development of more sophisticated regional value chains can significantly boost productivity, and should remain at the center of the region's policy agenda.About the IDB The Inter-American Development Bank (IDB), a member of the IDB Group, aims to improve lives in Latin America and the Caribbean. Founded in 1959, the Bank works with the region's public sector to design and facilitate innovative solutions that generate impact for sustainable and inclusive development. Through financing, technical expertise and knowledge, the IDB promotes growth and well-being in 26 countries.
