World Bank Improves Economic Growth Forecast for Latin America and the Caribbean in 2021

The World Bank has improved its economic growth forecast for Latin America and the Caribbean, the region most affected by the coronavirus pandemic last year, with a projected increase of 4.4% for 2021, compared to 4.0% estimated at the end of 2020, as the multilateral organization reported on Monday, urging to take advantage of the recovery to restructure “key sectors”.

The COVID-19 pandemic The gross domestic product (GDP) of Latin America and the Caribbean (excluding Venezuela) contracted 6.7% in 2020, lower than the forecast of 7.9% earlier. month, details the World Bank in its latest semi-annual report, in which it highlights the “opportunity” offered by this rebound to make “a significant transformation in key sectors” such as energy.

The international body warned, however, that the region could enter an “accelerated” process that would increase “inequalities within and between countries.”

“This pandemic has given rise to a process of creative destruction which can lead to faster growth but which can also increase inequalities within and between countries in the region”, said Martín Rama, the World Bank’s chief economist for Latin America and the Caribbean.

Panama and Peru are the countries that will experience the highest economic growth this year, with growth of 9.9% and 8.1%, respectively.

Next, Argentina, with around 6.4%; Chile with 5.5% and Colombia with 5%, all above the regional average; while Brazil and Mexico, the two largest economies, will do so by 3% and 4.5% respectively.

Among the encouraging elements for the region, the organization led by David Malpass highlighted the recovery in commodity prices and the rebound in remittances sent by immigrants, which represent an important economic support in Central America and the Caribbean.

The World Bank (WB) will hold its spring meeting next week with the International Monetary Fund (IMF), again virtually, and at which global prospects and challenges will be discussed amid the recovery from the deep crisis triggered by the pandemic. .

A few weeks ago, the Inter-American Development Bank (IDB) urged Latin America to take advantage of the economic effects of the pandemic such as the alteration of supply chains and bet on the relocation of companies and economic integration.

The need is particularly urgent given the deep economic and social crisis in the region, one of the hardest hit by covid-19.

Currently, Latin America and the Caribbean has a low participation in global value chains (production and supply in different geographies), both in terms of percentage and at different stages, which in the case of this region is mainly concentrated in the export of raw materials. commodities, premiums or derivatives.

The foreign value added to the exports of the countries of the region has fluctuated around 18 and 19% over the past 30 years, while this same value has reached 33% for Asia and 43% for the States of the European Union ( EU), according to agency data.

“Latin America and the Caribbean must make an effort to achieve greater regional integration which, in turn, allows it to integrate more effectively into the world”said IDB President Mauricio Claver-Carone during the presentation of the panel “Investing and strengthening regional value chains as a driver of economic recovery”.

One of the key elements is proximity to the largest market in the world: the United States.

Claver-Carone gave the example of Colombia, which “is already the seat of the relocation of activities in technological services, food and beverage products, plastics and resins” and has the potential to develop in sectors such as the pharmacist and the automobile.

The IDB believes that by strengthening its regional value chains in the hemisphere, Latin America and the Caribbean could increase its exports to the United States by $ 70,000 million through gradual increases in sectors such as textiles, medical products and automobiles.

For this, it is essential “to improve the physical and digital infrastructure of trade and to advance the ongoing agenda of modernizing and harmonizing trade agreements and regulatory and normative frameworks”.

The panel included the participation of the President of Colombia, Iván Duque; the Secretary-General of the Organization for Economic Co-operation and Development (OECD), Ángel Gurría; and several executives from the private sector.

The Colombian president underlined the open potential of the region.

“If we are competitive in terms of quality and price, and we are also close to the market, the opportunity is given to be capitalized. The reality left by the pandemic is that it has alerted us to the fragility of the global economy and also to the risks of the US economy when it has much of its industrial supply chain in places. distant, ”said Duque.

Economic activity in the Latin American region fell 7.4% in 2020, the biggest drop in decades, and despite the expected rebound for this year of 4.1%, not expected to return to the pre-pandemic level until 2023, mainly due to the strong impact of the health crisis on employment, according to data from the International Monetary Fund (IMF).

With information from EFE

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