Commission says Latin America and Caribbean region has seen largest average contraction in 120 years
NASSAU, BAHAMAS — The Latin America and the Caribbean region will experience a contraction of -7.7 percent in 2020 but will have a positive growth rate of 3.7 percent in 2021, due mainly to a statistical rebound that will nonetheless be insufficient for recovering the economic activity levels seen prior to the coronavirus pandemic, the Economic Commission for Latin America and the Caribbean (ECLAC) indicated in its most recent report.
ECLAC released its Preliminary Overview of the Economies of Latin America and the Caribbean 2020 — one of the United Nations (UN) organization’s flagship annual reports — during a virtual press conference given by ECLAC Executive Secretary Alicia Bárcena.
According to the document, in a context of global contraction, Latin America and the Caribbean is the region in the developing world that has been hardest hit by the crisis stemming from COVID-19. In the decade prior to the pandemic, the region was on a low-growth trajectory, and in 2020 it faces an unprecedented combination of negative supply and demand shocks, which is translating into the worst economic crisis in the last 120 years.
The Caribbean in particular is seen contracting by -7.9 percent in 2020 and growing by 4.2 percent in 2021, according to ECLAC’s projections.
Although the significant fiscal and monetary efforts made by countries have served to mitigate the effects of the crisis, the pandemic’s economic and social consequences have been exacerbated by the structural problems that the region has suffered historically.
In 2021, ECLAC foresees a positive GDP growth rate that will fundamentally reflect a statistical rebound, but the process of recovering pre-crisis levels of gross domestic product (GDP) will be slow and will not conclude until 2024.
Bárcena stated: “The growth dynamic in 2021 is subject to high uncertainty related to the risk of renewed outbreaks of the pandemic, the agility with which vaccines are produced and distributed and the capacity to maintain fiscal and monetary stimulus to support aggregate demand and productive sectors.
“Making progress on sustainable and inclusive growth necessitates a productive transformation towards environmentally sustainable sectors, which would favor job creation and technological innovation.”
ECLAC’s document emphasizes that to keep the region from perpetuating its low-growth dynamic, expansionary fiscal and monetary policies are needed along with environmental and industrial policies, all of which would enable the structural transformations that the region requires and would promote sustainable development.
It also poses the need to prioritize spending on the economic and social reactivation and transformation by fostering employment-intensive and environmentally sustainable investment in strategic sectors; to extend the basic income to people living in situations of poverty; provide financing to micro, small and medium-sized enterprises (MSMEs); offer incentives for productive development, the digital revolution for sustainability and clean technologies; and universalize social protection systems.
The report contends that beyond national efforts, the region’s economic reactivation and transformation will require financing and international cooperation. In this area, it stresses the need to utilize instruments such as the issuance and reallocation of the International Monetary Fund’s Special Drawing Rights (SDRs) to strengthen the reserves of the region’s countries and regional agreements; include vulnerable middle-income countries in the G20’s debt moratorium initiative (DSSI) and also set in motion the debt for climate change adaptation swap in the case of the Caribbean, along with the creation of a resilience fund; and capitalize multilateral, regional and national credit institutions.