The World Bank said Tuesday that it expects an economic expansion of 3.7% in Latin America and the Caribbean this year, improving on its previous forecast of 2.8% growth for the region, which has been hit hard by the coronavirus pandemic.
“Regional economic activity is expected to grow 3.7% in 2021, as initiatives to mitigate the pandemic become more flexible, vaccines are distributed, prices of main commodities stabilize and external conditions improve,” the multilateral body said when disclosing its global economic prospects.
However, the World Bank stressed that the recovery, which will come after a decade of slow growth, “will be very slight.”
And it warned that a negative scenario, with delays in the distribution of the Covid-19 vaccine and secondary economic effects, could reduce the projected increase in Gross Domestic Product (GDP) to 1.9%.
“The outlook presents adverse risks,” it said.
According to the forecasts of the World Bank, several factors could reduce the pace of activity.
It mentioned among them “the impossibility of containing the pandemic, problems related to debt and external financing, the resurgence of social tensions, economic damage caused by the pandemic whose severity was not anticipated, and disturbances related to climate change and natural disasters.”
It also warned about the deterioration in investor confidence and the decline in creditworthiness throughout the region.
In 2021, the World Bank forecasts an economic expansion in all Latin American and Caribbean countries, except Nicaragua and Suriname, where it anticipates a contraction of 0.9% and 1.9%, respectively.
For Brazil, the largest Latin American economy, it expects a growth of 3%, driven by a rebound in consumption and private investment.
In Mexico, it is confident of an expansion of 3.7%, particularly after the entry into force of the United States-Mexico-Canada Agreement, the new North American free trade agreement.
Argentina and Colombia, meanwhile, will grow 4.9% each, according to the World Bank. In both countries, it expects a GDP expansion due to higher domestic demand. And it points out that the Argentine economy will benefit from less uncertainty about the restructuring of its debt.
For Central America, the expected growth in 2021 is 3.6%, sustained by a higher inflow of remittances, which come mainly from the United States, and reconstruction after the onslaught of hurricanes Iota and Eta. The recovery in tourism will support the expansion in the Caribbean, which is forecast at 4.5%.
The World Bank recalled the strong impact that the pandemic has had in Latin America and the Caribbean.
“It is estimated that the regional economy contracted 6.9% last year,” the Washington-based agency said.
In particular, it pointed to an 8% year-on-year drop in the volume of goods exported from the region in the first three quarters of 2020, as well as a halt in the entry of tourists and an exacerbation of food insecurity given the general decrease in income.