“We must invest in a sustainable and inclusive future driven by smart policy, meaningful investments and an effective and strong multilateral system that places people at the center of all socio-economic endeavors,” said Secretary General António Guterres
Both Latin America and the Caribbean will have to face a fragile and irregular recovery due to the long-term consequences caused by the COVID-19 crisis in the economies of the region, according to the UN report on the Situation and Outlook for the World Economy in 2021, published today.
The report warns that the socio-economic impact caused by the COVID-19 pandemic will be tangible for many years to come, unless strategic investments are made in the fields of economy, society and climate resilience to ensure a sustainable recovery. and resilient of the world economy.
In 2020, the world economy sank by 4.3%, about 2.5 times more than during the global economic crisis of 2009. The humble recovery forecast for 2021 of 4.7% will barely offset the losses in 2020.
The pandemic has destroyed countries in Latin America and the Caribbean, with a high cost of human lives and an economic recession of historic proportions. Regional GDP decreased by about 8% in 2020 due to the prolongation of national containment measures, the decrease in merchandise exports and the collapse of economic activities caused by the decline in the tourism sector.
“We are facing the worst economic and health crisis in the last 90 years. While we mourn the growing death toll, we must also remember that the decisions we make now will determine the future of all, “said the Secretary-General of the United Nations, António Guterres. “We must invest in a sustainable and inclusive future driven by smart policy, meaningful investments, and an effective and robust multilateral system that puts people at the center of all socio-economic endeavors.”
The report highlights that sustained recovery from the pandemic will depend not only on the extent of stimulus measures and the rapid introduction of vaccines, but also on the quality and effectiveness of those measures in increasing resilience against future shocks.
The difficult path for Latin America and the Caribbean to emerge from the COVID-19 crisis
“Although no country in the region has recovered from the collateral effects of the crisis, the severity of the crisis has varied significantly between affected countries,” said Hamid Rashid, Director of the Global Economic Monitoring Unit in the Department of Economic Affairs and Social, and lead author of the report.
Haiti, Paraguay and Uruguay, for example, have been able to contain the spread of the virus and limit the economic damage. On the other hand, Argentina, Peru, Panama, as well as all the Caribbean economies that depend on tourism, have been strongly affected, with GDP recessions of up to two figures. A faster-than-anticipated rebound in commodity prices, driven by strong industrial activity in China, and remittance income, has helped many economies in South and Central America.
The region’s short-term forecast is plagued by uncertainties about the evolution of the pandemic, the introduction of vaccines, and the impact of economic policy measures. The United Nations baseline scenario foresees a modest recovery with growth of 3.8% in 2021 and 2.6% in 2022, and total production is expected not to reach its pre-crisis level until 2023 .
The pandemic reached the countries of Latin America and the Caribbean at a time when they were already experiencing severe economic, social and political difficulties. As a result, a number of deeply rooted structural inequalities have come to light and been exacerbated, for example between formal and informal workers, or between women and men.
Millions of jobs have disappeared, especially in the informal sector, where most jobs require strong physical contact. The population groups most affected have been women, young people and workers with a more limited education, who make up the majority of jobs in sectors such as retail or hospitality. Losses of jobs and income have forced millions of people in Latin America and the Caribbean to fall into poverty, ending any progress made in the past 15 years.
Investment activities throughout the region have been hit hard, and probably for a long time, by the pandemic. Amid the sharp drop in customer demand, temporary business closures, and increased uncertainty, companies have returned to investment plans.
The 13% decline in investment in 2020 overshadows the decline experienced in 2009. While investments recovered rapidly after the global financial crisis, such a recovery seems unlikely this time around such significant uncertainties and persistent that exist. The threat of another possible decade of losses in terms of economic growth and progress in development looms in Latin America and the Caribbean.
The report emphasizes that the fiscal and monetary support measures have been a decisive resource for homes and businesses throughout the region. Despite the fact that many countries have entered the pandemic with considerable fiscal deficits and high levels of public debt, the Government has implemented sufficient resources to combat the economic and health crisis. Brazil, Chile and Peru have introduced the largest stimulus measures in the region, which have amounted to 10-15% of GDP.
“Going forward, continued fiscal support will continue to be critical to recovery as national efforts and mobilization resources need to be complemented by better access to external financing,” Rashid added.
Without decisive political action, the crisis could have had a negative and prolonged impact on the region’s labor markets and investments in physical and human capital. This, in turn, could have further impeded innovation and productivity growth, holding back living standards. Against this situation, the demands for a new development model are increased, focused on a radical transformation of production and consumption patterns.