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Latin America does not save enough

According to the Inter-American Development Bank (IDB) both businesses and government in Latin America are not good at economizing and this is restricting the growth potential in the region.

The report said that the national savings rate in Latin America and the Caribbean between 1980 and 2014 was only 17.5% of the Gross Domestic Product, well below the 33.7% registered in the emerging economies in Asia and 22.8% in advanced economies.

Only Africa had a lower figure with 13.8%.

The document is entitled “Saving for Development: How Latin America and the Caribbean Can Save More and Economize Better”.

The report said that given the fiscal challenges that the region is facing and will face in the future, increasing the amount of savings would be key. It is estimated that for each addition percentage point saved nationally, internal investment would increase by almost 0.4 percentage points which is equivalent to US$20 billion that would be available to finance infrastructure projects or other investments in human capital,

Chief Economist and Manager of the Research Department at the IDB Jose Juan Ruiz said that the low regional levels of saving are not justified. Ruiz said that although the Latin American banking sector had grown and was lending almost 30% of GDP in loans to the private sector, the amount is still way lower than the emerging economies of Asia that loan around 80% of GDP.

In addition, looking at the population in the region as a whole, only 16% of adults had savings in banks compared to 40% in Asian emerging economies and 50% in developed countries.

The report said that to rectify the situation the investment in the region should increase to between two and four percentage points of GDP each year and continue for decades.

Source: DR1, Listindiario

June 15, 2016

Category: DR News |

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