Less than three months from the end of 2020, the year that will change the script of contemporary economic history, there are a handful of things that are clear in Latin America. It will certainly be the worst exercise in records: more than a century, according to ECLAC data, which has one of the most complete GDP series for the region. And poverty, the great scourge that the bloc has not managed to leave behind even in the years of most buoyant growth, and the main indicators of social welfare will return to levels of a decade ago. Recognizing all this, the World Bank escapes this Friday from the prevailing pessimism about the region and makes a moderately optimistic reading: the rebound in 2021 will be stronger than expected. All in all, the region will have to wait – as soon as possible – until 2023 to regain its pre-pandemic GDP level.
The multilateral sees “signs” that the impact could end up being “less serious” than was initially feared: world trade has already returned to pre-crisis levels; commodity prices have held up “relatively well”; Remittances, after falling “abruptly” in the early stages of the crisis, have also returned to positive territory; and “few” countries have seen their access to international financial markets limited to issue new debt. “Economic policies should aim to take advantage of these opportunities,” underline the World Bank technicians. These elements allow it to notably revise its growth forecast for next year upwards —the rebound will be 4% and not 2.8%, as it foresaw in June— despite deepening the fall forecast for this catastrophic 2020 —the 7 , 2% becomes 7.9% -.
Among the large countries, Argentina will suffer the largest drop in GDP this year (-12.3%, the third year in negative), followed by Peru (-12%), Ecuador (-11%) and Mexico (-10% ). On the other hand, Brazil (-5.4%), Chile (-6.3%) and, to a lesser extent, Colombia (-7.2%) will be the ones that best withstand the rate. If the entire Latin American and Caribbean region is taken into account, and not only the largest economies, the greatest setbacks will occur in two Caribbean countries, Saint Lucia (-18%) and Belize (-17.3 %), which in a single exercise will see almost a fifth of their product disappear. On the other hand, Guyana, which lives an authentic boom oil, will be the only economy that will escape from burning with growth, attention, higher than 23% this year.
In 2021 the entire region will be dyed green with the sole exception of Venezuela, a country that the World Bank has not included in its projections for years. Among the major economies of the bloc, Peru will achieve the highest rebound (+ 7.6%), followed by Argentina (+ 5.5%), Ecuador (+ 4.8%) and Colombia (+ 4.5%). Chile will grow 4.2%, Mexico 3.7% and Brazil 3%. And only four countries in the area, Uruguay, Paraguay, the Dominican Republic and Guatemala will be able to recover in 2021 all the ground lost with the health outbreak.
“Governments must protect the most vulnerable while adjusting sanitary standards,” says Martín Rama, World Bank chief economist for the region. “Ensuring broad and affordable access to health care is critical to meeting this challenge.” The multilateral technicians value the “robust” stimulus packages “despite fiscal restrictions” and that “a good part” of these resources went to social transfers: “their multiplier effect on economic activity is being significant”, they detail. The agency, however, also issues a warning to sailors. “Rightly, the executives increased spending to face this crisis, but the levels of public debt have risen significantly and the countries will have to find a way to get back on the path of fiscal balance.”
In its update of the regional macroeconomic picture, the Washington-based organization also focuses on informality, a reality that distinguishes Latin America from advanced economies and also from most of the emerging bloc countries: with almost half of the workers without any type of social coverage, this reality has amplified the blow of the pandemic. The impact of the confinements, the World Bank remarks, fell “disproportionately” on households with informal jobs. “You have to put the focus there, both in the short term and in the long term.”