The region's economic output grew 5.7% last year - the fastest pace in 24 years - but the annual growth rate will drop to around 4.3% in 2005 and 3.7% in 2006, the multilateral lender estimated in a report.
It attributed last year's rapid expansion to strong demand for exports, soaring commodity prices and low international interest rates. But it warned that an expected stabilization in commodity prices, a slowing global economy, rising interest rates and inflationary pressures are acting as a drag on growth.
"The country fundamentals are solid, but the region has to follow a prudent policy to reduce vulnerabilities to higher interest rates and a global growth slowdown," said Guillermo Perry, the World Bank's chief economist for Latin America and the Caribbean.
Perry recommended that countries in the region prepare for the shifting global conditions by exercising prudence in public social spending, building fiscal surpluses and reducing public debt.
The World Bank is forecasting that global economic output will rise 3.1% this year, down from 3.8% in 2004, which was the strongest growth rate in four years. It estimates that developing economies will expand 5.7% this year, down from last year's 6.6% growth rate, which was the biggest expansion in 30 years.
The Washington-based lender said remittances from overseas workers to Latin America and the Caribbean rose to $37 billion in 2004 from $34 billion in 2003 and $20.2 billion in 2000.
It estimated that the region received $42.4 billion in foreign direct investment last year, up from $36.5 billion in 2003. (Dow Jones)
