Growth in Latin America and the Caribbean recovered briskly in the second half of 2020, yet still more slowly than the global economy and other emerging markets, the IMF announced yesterday (Thursday, April 15th) in a press briefing in Washington, DC.
“The 7 percent contraction in economic terms that Latin America experienced in 2020 was the most pronounced in the world, obviously exceeding the 3.3 contraction experienced by the world economy and for 2021 we are anticipating a recovery of 4.6. For this reason, Latin America at the end of 2021 will not recover the levels of economic activity it had before the pandemic,” said Alejandro Werner, Director of the Western Hemisphere Department of the International Monetary Fund.
However, the outlook is subject to an extraordinary degree of uncertainty as the race between vaccines and the virus continues.
“These projections are subject to an even greater degree of uncertainty than normally, because obviously in order to understand the operation of some economies during the pandemic, we do not have so many references to basically anticipate and project the behavior of the Latin American economies. We also continue to see in many countries in the region the intensification of the pandemic. Therefore, it will be very important to continue to take measures from the public health point of view to contain infections, but also to accelerate vaccination campaigns during the year 2021,” said Werner.
He warned that Latin America was already growing slower than any other region pre-pandemic and will face higher debt, greater poverty, and education setbacks after the pandemic.
“We are estimating that in the year 2021 the population in poverty in Latin America will increase by almost 20 million people with respect to the level in 2019,” Werner explained.
He concluded his remarks by highlighting the importance of coping with the medium-term fiscal challenge the region is facing now. It is expected that Latin America will come out of the pandemic with significantly higher debt levels than the pre-pandemic era.
“Latin American economies are going to face a significant fiscal challenge in the medium term, because we are going to emerge from this pandemic period with significantly higher debt levels than we had before the pandemic and this is obviously will make these economies more vulnerable to changes in interest rates, both domestic and international. And hence the importance of sending clear signals that, leaving behind the economic emergency that is currently being experienced, appropriate measures will be taken to guarantee that the evolution of debt will lead us to debt levels, to sustainable debt-GDP ratios. It is an important topic that we mentioned in the blog,” said Werner.