The World Bank has reduced its 2025 economic growth forecast for Latin America and the Caribbean to 2.1 per cent, down from its January projection of 2.5 per cent, amid what it describes as increasing global uncertainties that regional economies must navigate.

In its latest assessment released during the IMF and World Bank spring meetings in Washington, the global lender identified several factors behind the downward revision, including delayed interest rate cuts in developed economies, rising concerns about global trade restrictions, China's economic slowdown, and reductions in overseas development assistance. Earlier this week, the IMF similarly trimmed GDP growth projections for the Latin America and the Caribbean region to 2.0%.

"The global economic landscape has changed dramatically, marked by higher levels of uncertainty," said Carlos Felipe Jaramillo, the World Bank's vice president for Latin America and the Caribbean Region, in a statement.

“Countries must recalibrate their strategies and advance bold and practical reforms that boost productivity, competitiveness, while tackling long-standing gaps in infrastructure, education, trade and governance to ensure job creation and better opportunities for businesses and citizens.”

With the meagre projected 2.1 per cent growth rate, Latin America and the Caribbean would be the slowest-growing region globally this year, according to the World Bank.

The outlook for the region's two largest economies has notably deteriorated since January. Mexico faces a particularly severe adjustment, with its growth forecast reduced to zero per cent from the previously anticipated 1.5 per cent expansion.

Brazil's growth projection has also been cut to 1.8 per cent from 2.2 per cent.

These downward revisions come in the wake of the IMF's forecast earlier this week predicting a 0.3 per cent contraction in the Mexican economy, with the fund warning that US tariffs and rising trade tensions would further impede global economic growth.

In a rare positive adjustment, Argentina—which recently clinched a $20bn agreement with the IMF in a win for President Javier Milei's bold economic reform programme—saw its growth forecast increase to 5.5 per cent for this year, up from the previous estimate of 5 per cent.

Government spending remains a pressing concern across the region, with the World Bank estimating that the regional debt-to-output ratio increased to 63.3 per cent last year from 59.4 per cent in 2019.

The shifting trade landscape presents both challenges and opportunities. The Bank notes that nearshoring trends, which initially seemed promising for the region, have yielded mixed results, with some economists suggesting that Latin America risks being left behind.

"Access to technology and exploiting scale economies dictate that trade and FDI remain essential to accelerating growth in Latin America and the Caribbean," said William Maloney, the World Bank's chief economist for the region. A diversified range of trade destinations and service exports, alongside nearshoring potential, offer opportunities that "require increasing both productivity and nimbleness," he added.

The efforts by Mexico and Mercosur nations to strengthen trade ties with the European Union represent attempts to diversify relationships beyond traditional partners. However, this integration creates its own vulnerabilities, as workers in export-oriented sectors become increasingly exposed to fluctuations in global trade.

The World Bank's bleak assessment suggests that to overcome these challenges, the region will need to implement structural reforms in multiple areas, particularly as it confronts a more uncertain global economic environment.