After a year of making drastic economic decisions to slow down the spread of the COVID-19 pandemic, Latin America and the Caribbean region is expected to see growth in its economies this year, the International Monetary Fund said Thursday.
But the persistence of the health crisis in many countries casts a shadow on the near-term outlook, and the projected growth rate for the region is 4.6 percent — well below the United States’ projected 6.5 percent rebound and China’s 5.8 percent for this year, said Alejandro Werner, head of the International Monetary Fund’s Western Hemisphere Department.
“Latin America at the end of 2021 will not have recovered the economic level, pre-pandemic,” he said. “The per capita [Gross Domestic Product] will not get back to pre-pandemic levels before 2024.”
Before last year’s coronavirus pandemic hit, and turned Latin America and the Caribbean into a hot spot for the virus, economies were already struggling. The situation has only become more difficult as governments have fallen deeper into debt to keep their economies running and provide citizens’ basic needs.
The population in Latin America that is in poverty may increase by 20 million people compared to the level in 2019. The number of weeks that schools were either partially or completely shut down was “the highest in the world,” Werner said.
“The cost in terms of future incomes for children and adolescents who are still in school will be significant,” he added. “In the next few months, an important challenge for the region will be to implement measures that can partially offset that educational loss that was caused by the pandemic. That is going to have a bearing on future income distribution.”
Werner said the 4.6 percent growth projection is based on the dynamics the fund has witnessed in the region’s economies and how they have been operating in the face of the global pandemic, which has forced the closures of borders and schools, and led to widespread unemployment as businesses shutter.
“We hope the vaccination campaigns will gain speed during the rest of the year and that will help reopen the economies in the region,” he said.
Werner said the area’s economy contracted by 7 percent in 2020, more than double the 3.3 percent contraction that affected the global economy.
Werner sad the forecasts are characterized by a greater than ever uncertainty, making it difficult to project the performance of Latin America’s economies. The region is still seeing a deadly resurgence of COVID-19 as nations struggle to get access to vaccines.
The slow vaccine rollouts in most of the region, with the exception of Chile, combined with the recent resurgence of the virus in Brazil, Chile, Paraguay, Peru and Uruguay, cast a shadow on the near-term outlook, Werner has said.
On Wednesday, Pan American Health Director Dr. Carissa Etienne noted that the virus continues to ravage the region. Since the pandemic began, 57 million cases have been reported in the Americas, which includes the United States, Canada and Mexico, with more than 1.3 million deaths.
This rise in infections across the region is alarming, she said, and despite the ongoing transmission in many places, restrictions have been relaxed. Crowds are back, and people are gathering indoors and taking public transportation, often without masks
“It’s going to be important to continue to take measures of public health so as to stop transmission of the disease, and it’s also for us to accelerate the vaccination campaigns in 2021,” Werner said.
Werner said another risk factor is interest rates, which could lead to greater volatility in the region that could constrain the recovery. He noted that although two-thirds of the jobs lost have been regained, there are still millions of workers in the formal and informal sector who remain unemployed.
“These unemployed are the people with the lowest level of education, the people who have the fewest resources to deal with this long-term unemployment. The same can be said about poverty,” Werner said.
The region, Werner said, is going to come out of pandemic with significantly higher debt levels than what existed pre-pandemic, making economies more vulnerable. Those economies that have the resources, he said, should continue to support citizens with stimulus assistance, though probably less than what was provided for in 2020.