Latin America’s recovery from the pandemic crisis is lagging the rest of the world and the economy will not return to its pre-pandemic level until 2024, the IMF warned Thursday.
The persistent health crisis caused by Covid-19 remains a concern, and though growth has accelerated, helped by stronger recoveries in trading partners, the region will need a “short-term shot” of support, said Alejandro Werner, head of the International Monetary Fund’s Western Hemisphere Department.
The region’s economy contracted by 7.0 percent in 2020, “the sharpest in the world” and far exceeding the global economy’s slowdown of 3.3 percent, Werner said in a blog post.
Regional growth is expected to rebound by 4.6 percent, below the 5.8 percent estimated for other emerging markets excluding China, according to the latest regional economic outlook.
“Income per capita will not catch up with its pre-pandemic level until 2024, resulting in a 30 percent cumulative loss relative to the pre-pandemic trend,” Werner said.
Poverty is estimated to have increased by 19 million people, and inequality also rose, with women and low-educated workers struggling the most, according to the report.
“The pandemic will also leave long-lasting damage to human capital from school closures, which were longer than in other regions,” he said.
Werner said governments with sufficient resources should continue to support programs for their economies, while those with tight budgets “should reprioritize spending towards healthcare and support for households, and work to create additional fiscal space.”
Massive US stimulus plans have helped support manufacturing in Mexico, and likely will give a boost to Central American economies as well, he said.
But the recent resurgence of the virus in Brazil, Chile, Paraguay, Peru and Uruguay, combined with slow vaccine rollouts in most countries except Chile, “cast a shadow on the near-term outlook.”
In the Caribbean, tourism-dependent economies “will be the last to recover (only in 2024) due to the slow resumption in tourism,” Werner said.