Is the Growth Momentum in Latin America Sustainable?

Is the Growth Momentum in Latin America Sustainable?

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A favorable external environment coupled with prudent policies fostered output growth in most of Latin America during the last decade. But, what were the drivers of this strong growth performance from the supply side and will this momentum be sustainable in the years ahead? We address these questions by identifying the proximate causes of the recent high GDP growth and estimating potential growth rates for the period ahead for a large group of Latin American countries based on standard (Solow-style) growth accounting methodologies. We find that factor accumulation (especially labor), rather than growth in total factor productivity (TFP), remains the main driver of GDP growth. Moving forward, given the expected moderation of capital accumulation and some natural constraints on labor, the strong growth momentum is unlikely to be sustainable unless TFP performance improves significantly.Designing a policy agenda to unleash productivity is, however, a difficult task and entails country-specific measures. ... Figure 11. Institutional Factors and TFPGrowth TFP Growth, Doing Business, and Financial TFP Growth and Education ... Change is calculated as the difference between 1Average grade In math tests In hlgh School2006 and 2013, 22003a€”12 annual average growth rate , in percent.

Title:Is the Growth Momentum in Latin America Sustainable?
Author:Sebastian Sosa, Evridiki Tsounta, Miss. Hye S Kim
Publisher:International Monetary Fund - 2013-05-15


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