Inflation continues to pose challenges across major economies in Latin America and the Caribbean, despite overall progress toward stabilization. While most large nations are on course to meet their inflation targets by 2026, the final phase of disinflation has proven difficult, particularly due to sustained price pressures in the services sector driven by rising labor costs since early 2025. As a result, central banks have maintained a cautious stance, with policy interest rates declining at a slower pace than previously anticipated. Despite stable inflation expectations, the persistence of core inflation underscores structural economic imbalances that require careful monetary management.
Social indicators remain a concern. Economic sluggishness has hindered job creation, slowing improvements in poverty and inequality. In 2025, it is projected that 25.2 percent of the region’s population will live in monetary poverty, measured against a revised upper-middle-income threshold of $8.30 per day in 2021 purchasing power parity terms. Meanwhile, income disparity remains pronounced globally, with a Gini coefficient of 49.1. These figures highlight the need for inclusive growth strategies.
A key pathway to stronger economic performance lies in supporting entrepreneurship and private-sector development. These actors are critical for driving innovation, expanding employment opportunities, and enhancing productivity. Fostering a business-friendly environment could accelerate recovery and help address long-standing structural weaknesses in the region’s economies.
— news from World Bank
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Economic Review | Latin America and the Caribbean October 2025
Key Messages n nChapter 1. Persistent Inflation and Slowing Growth Amid Global Uncertainty n nMost large countries continue to be on track to meet their inflation targets by 2026, but the last mile is proving difficult. Though inflationary expectations remain anchored, rising labor costs in the service sector have led to persistent core inflation across some major economies since the first quarter of 2025, and policy interest rates are, in general, falling more slowly. n nProgress on poverty and inequality remains slow, largely reflecting continued sluggish job creation resulting from weak economic dynamism. In 2025, monetary poverty is expected to decrease marginally to 25.2 percent of LAC’s population (based on a newly revised upper-middle-income poverty line of $8.30 per day in 2021 purchasing power parity terms), while inequality is expected to remain high by global standards, with the Gini index reaching 49.1. In this complex scenario, empowering entrepreneurs and the private sector is essential. They can help fuel needed rapid growth and job creation as central actors in economic progress. n nChapter 2. LAC’s Entrepreneurship Challenge