World Bank warns of new ‘lost decade’ in Latin America

The consequences of the coronavirus pandemic will take years to disappear in Latin America and the CaribbeanAnd the region will lose another decade if it does not urgently implement reforms that boost growth and reduce social tensions, the World Bank warned on Wednesday.

“Today more than ever, it is necessary to find a dynamic, inclusive and sustainable growth to repair both the legacy of the pandemic and the persistent social needs”, considered the bank in its report “Regaining Growth: Rebuilding Dynamic Post-COVID Economies with Budget Constraints”.

The economic report was released at a time when the region continues to be the global epicenter of the pandemic, amid persistent criticism from governments and the Pan American Health Organization for the lack of equitable access to vaccines.

Encouraged by accelerating COVID-19 vaccination and declining deaths, regional economic growth could be 6.3% in 2021, but it would not be enough to fully reverse the 6.7% contraction in 2020the World Bank said in its mid-year report.

Given the strong recovery in the region’s major economic partners, low global interest rates and good prospects for primary commodities, growth rates were expected to be 1.5 percent higher, the said. Washington-based financial institution.

He also pointed out that the economic growth forecast falls below 3% for 2022 and 2023.

While not entirely positive, the World Bank’s forecast is better than that of the Economic Commission for Latin America and the Caribbean (ECLAC), which recently updated its regional growth projections for this year to 5.9. %, with a slowdown to 2.9% in 2022.

In its report, the World Bank assures us that “The COVID-19 crisis has added to another ‘lost decade’ of low growth, suggesting deeper structural problems.”

Economists agree that structural problems, which have been further exacerbated by the pandemic, have limited economic growth in the region for decades.

Before COVID-19, Latin America already had a path to stagnation: between 2014 and 2019, it increased at an average rate of 0.3%, lower than the average of 0.9% recorded in the years of the World War I, and at 1.3%. of the Great Depression, according to ECLAC.

In 2019, growth was only 0.8% and fell to 6.7% in 2020, according to the World Bank.

The bank ensures that the region must implement “urgent but long-lasting reforms” in the areas of infrastructure, health, education, energy policy and innovation, and also address the challenges of climate change.

“Countries in the region have made enormous efforts to help families amid the pandemic,” said Carlos Felipe Jaramillo, the bank’s vice president for Latin America and the Caribbean. “Now the challenge is to achieve a strong recovery that offers job opportunities and heals the wounds of the crisis.”

This recovery, however, faces obstacles, including a possible resurgence of the virus, the persistence of inflationary pressures, the high level of corporate debt and the increase in the deficit and public debt.

Therefore, recommends the bank, there is a need to rethink the priorities of public spending, also to make them more efficient and to increase revenue.

At country level, The World Bank predicts that the Peruvian economy – one of the hardest hit in 2020 with a contraction of 11.1% – will be the one that grows the most in 2021 in Latin America, 11.3%, although it could contract. again at a rate of 3.2% in 2022. Chile, whose GDP fell by 5.8% in 2020, could grow by 10.6% in 2021 and 2.4% in 2022; and Panama, whose activity contracted by 17.9% in 2020, is expected to grow 9.9% in 2021 and 7.5% in 2022.

After an economic slowdown of 8.3% in 2020, economic activity in Mexico is expected to accelerate to 5.7% in 2021 and contract again to 3% in 2022. Brazil, whose economy has contracted by 4 , 1% in 2020, would reactivate its activity to 5.3% this year, although the World Bank predicts it will contract again to 1.7% in 2022.

From all over Latin America, The economy that grows the least this year is Ecuador’s, 3%, according to World Bank forecasts. Guyana, meanwhile, is the country with the highest growth in the entire region this year, 21.2%, but that would be just under half of the 43.5 it had in 2020.

In the Caribbean, where tourism is the engine of activity, there are countries whose economies will continue to be negative, such as Saint Vincent and the Grenadines, with a contraction of 6.1% expected for 2021.

(with AP information)

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