RIO DE JANEIRO, BRAZIL – Kristalina Georgieva, head of the International Monetary Fund (IMF), said Tuesday during an online conference for the Council of the Americas that the pandemic left Latin America in a “quite dramatic” economic situation, but said this should “serve the future” and called for “structural changes”.
According to the international lending institution’s official, the region is the hardest hit by the coronavirus at the global level. “Unfortunately for Latin America, the region has been severely affected,” she said.
According to her, with the pandemic it became clear that governments are not investing enough in their healthcare systems and that policies need to be improved in the future. However, she immediately highlighted as positive that central banks lowered interest rates and financial authorities implemented measures to increase spending or reduce tax collection.
“There is still much that can be done to remove obstacles for the private sector,” she said, but stressed that this is only part of the problem.
Governments should also focus on addressing the inequality that makes the region one of the most unequal in the world, she noted. This was also evidenced in the pandemic, when people who had access to digital technologies were able to continue with their jobs with no major inconvenience, while the poorest sectors were virtually unable to continue working.
“And that can only be fixed with structural policies, with structural reforms,” explained Georgieva.
During her speech, the IMF head stressed several times that the International Monetary Fund believes that crises are opportunities, and that the crisis triggered by the coronavirus pandemic should help Latin America implement policies to enable growth by reducing social inequality and promoting integration and investment.
“What can we do in order to emerge from the crisis stronger than when we entered it?” she asked, after noting that the downturn the region had been experiencing since before 2020 contributed further to the blow.
Projections
The IMF projected an 8.1% economic contraction in Latin America this year and a 3.6% rebound in 2021. This is the largest regional economic crisis in history, representing a setback of at least a decade, according to estimates by multilateral organizations.
In turn, the global economy will slow down by 4% in 2020 and should grow by 5.2% in 2021, according to the IMF, which means that the negative regional projections are twice as high as the global estimates.
“A crisis, a deep crisis, must serve for the future,” said the IMF’s director. “It should jolt us,” she said, noting that the results could have been even worse had Latin American governments failed to implement monetary policies to protect their economies.
Since 2012, Latin America has been experiencing an economic slowdown, which was exacerbated by a contraction in 2015 and 2016.
The economy was stagnant in 2019, and although a rebound had been expected for 2020, it failed to materialize because of the coronavirus. According to the IMF, the pandemic is the first truly global crisis that combines economic and health aspects.
Although inequality in the region has improved in recent years, it still persists and must be addressed because it is a structural impediment to growth, Georgieva said.
She added that the region should become more integrated and forge stronger economic ties to enable countries to access larger markets. As an example, she cited her own country Bulgaria, which joined the European Union for better opportunities.