translated from Spanish: World Bank warned that economic decline in Latin America by 2020 will be higher than expected

The World Bank said Friday that Latin America is the region hardest hit by the coronavirus pandemic and the contraction of its economy in 2020 will be greater than originally planned, with Argentina and Peru as the countries that will feel the effects the most. The international financial body expects the region’s Gross Domestic Product to be 7.9% at the end of the year, with growth of 4% by 2021. By June, the WB had projected that the annual decline across Latin America would be 7.2% by 2020, and a recovery of 2.8%.” Our region bears the worst economic and health impact due to Covid-19 worldwide, which demands greater clarity on how to combat the pandemic and regain economic course for rapid recovery,” said Carlos Felipe Jaramillo, MDB Vice President for Latin America and the Caribbean.The new projections are included in the report “The Cost of Staying Healthy” on the effects of COVID-19 on the region , and were disseminated a few days after the Economic Commission for Latin America (ECLAC) released that the impact of the economic crisis created by the pandemic would be greater than expected and its longer duration. ECLAC expects GDP to fall by 9.1%, although it has anticipated that estimates could change before the end of the year. The region has been slowing down since 2012, which deepened with a contraction in 2015 and 2016. In 2019 the economy remained stagnant. It was expected to gradually begin to recover in 2020, but the landscape changed with the coronavirus. The pandemic also came immediately after the wave of social unrest in some countries in the region, including Chile and Colombia.In its report, the WB warned that in order to achieve a sustainable recovery governments will have to serve the most vulnerable while redirecting their spending to sectors that generate jobs. If they do not, he warned, “it could be the harbinger of new waves of social discontent and the possible return of populist policies to the region. and that would be the worst cost of the COVID-19 pandemic.” Among Latin American economies, Argentina tops the list of the hardest hit, with a contraction of 12.3% by 2020, followed by Peru, with 12%; Ecuador, with 11%; Mexico, with 10%, El Salvador, 8.7% and Panama, 8.1%. Paraguay would be the least affected in Latin America, with a recession of 3.2%. In the Caribbean, where the vast majority of islands are supported by tourism, Saint Lucia would be the hardest hit, with an activity drop equivalent to 18% of GDP. If all Latin American and Caribbean countries are considered, the only one that would have economic growth is Guyana, 23.2%, due to oil. The WB stresses that although the outlook is negative, at the international level there are signs that the impact could be less severe than feared and Latin America should take advantage of that scenario. Among the positives, he stressed that world trade returns to previous levels of the crisis and commodity prices have remained “relatively well”. Protecting the most vulnerable is critical and improving health services should be part of policies to address the crisis, the report says, but it will also be essential to pay attention to public spending.” Emergency social transfers may still be necessary for the time being, but countries should find a way to take up the path of fiscal balance,” says the WB. “Taxes and public spending must be redirected to support job creation, service delivery and infrastructure development to put the region back on an inclusive and sustainable growth path,” the financial institution recommends.

Original source in Spanish