The Latin American and Caribbean (LAC) region experiences a sharp drop in growth due to the Covid-19 crisis (coronavirus), which will require multiple responses in terms of public policies to support the most vulnerable, avoiding a financial crisis and protect jobs, according to a new World Bank report.
In order to help the most vulnerable cope with the loss of income derived from social isolation, current protection and social assistance programs must be rapidly expanded, as well as their coverage, according to The Economy in the Times of Covid-19 (i), the latest biannual report from the World Bank’s Office of the Chief Economist for Latin America and the Caribbean.
At the same time, different governments are likely to support the financial sector institutions and major sources of employment.
«We must help people meet these daunting challenges and ensure that financial markets and employers can weather this storm,» said Humberto López, acting vice president for the Latin America and Caribbean region. «This means limiting the damage and laying the foundation for recovery as soon as possible.»
In the past twelve months, a series of seizures impacted economic growth in the region, beginning with social tensions, the collapse in international oil prices, and now the Covid-19 (coronavirus) crisis. As a result, growth is being affected.
According to the report, the Gross Domestic Product of the Latin America and the Caribbean region (excluding Venezuela) is expected to fall -4.6% in 2020. * A growth return of 2.6% is expected for 2021.
The coronavirus pandemic is causing a huge supply shock. Demand from China and the G7 countries is projected to decline sharply, impacting commodity exporting countries in South America and exporting countries of services and industrial goods in Central America and the Caribbean. A collapse of tourism would have a very severe impact in some Caribbean countries.
Many countries in Latin America and the Caribbean face this crisis with a limited fiscal space. The higher level of informality makes it more difficult to reach all households and protect all sources of employment. Many households live daily and lack the resources to face the isolations and quarantines necessary to contain the spread of the epidemic. Many also depend on rapidly declining remittances. In order to help the most vulnerable to cope with these economic difficulties, current protection and social assistance programs must be rapidly expanded, as must their coverage.
At the same time, governments will have to bear most of the losses. The socialization of these losses could demand a shareholding in financial institutions and strategic employers, through their recapitalization. This support will be key in preserving jobs and in a future recovery.
However, these processes must be transparent; Mechanisms should also be established to manage newly acquired assets, based on the best practices of sovereign wealth funds and asset management companies.
«The governments of Latin America and the Caribbean face the enormous challenge of protecting lives and at the same time limiting economic impacts,» said Martín Rama, chief economist at the World Bank for the Latin American and Caribbean region. «This will require targeted and consistent policies on a scale rarely seen before.»
Support from the World Bank Group to face the coronavirus crisis:
The World Bank Group is taking comprehensive and firm steps to help developing countries strengthen their response to the pandemic, improve health surveillance and public health interventions, and help the private sector maintain its operations and leadership positions. job. It will provide up to $ 160 billion in financial support over the next 15 months to help countries protect the poor and vulnerable, support businesses, and fuel economic recovery.
Due to the Covid-19 pandemic, the economic circumstances within each country or region are variable and change from day to day. The analysis in this report is based on the latest data available at the country level as of April 10.