In most Latin American countries, income inequality is set to reduce over the period to 2040. Increasing investment in rural development and rising agricultural productivity are expected to diminish the rural/urban income gap, while increasing access to social services is set to foster middle class expansion. Nevertheless, the short-term consumer market outlook in Latin America remains clouded by among the highest inflation rates globally, constraining growth in discretionary spending.
This report comes in PPT.
Total disposable income in Latin America is set to rise by nearly 60% in real terms over 2021-2040, due to narrowing regional disparities, technological advancement, and a transition towards higher value-added sectors. However, average consumer income will remain among the lowest globally, due to the prevalence of sectors with low profitability, and a large informal labour market.
Latin America remains the most unequal region in the world in terms of incomes; however, 10 out of 17 Latin American countries are set to see the number of middle-class consumers expanding at the fastest pace over the period to 2040. Growing access to education, healthcare and social benefits, as well as the rising availability of higher value-added labour market opportunities, are expected to drive middle class growth in the region.
Per capita consumer incomes in urban and rural areas are set to almost equalise over the period to 2040, as incomes in rural areas are rising at a faster pace. Rural consumer income growth is being supported by improving infrastructure and connectivity, advances in agricultural productivity, as well as upskilling and reskilling initiatives within the region that create better employment opportunities.
Latin America is the region that has been affected most by high inflation over 2021-2022. Prices of transportation, housing and food continue to rise rapidly, taking a toll on lower income households and squeezing their discretionary spending potential. Rising food prices have also added to worsening food insecurity within the region, with the number of people affected expected to continue rising sharply if the conflict in Ukraine continues.
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