RIO DE JANEIRO, BRAZIL – Latin America will recover the level of per capita income it had before the pandemic only in 2024, estimated Thursday the International Monetary Fund (IMF), which warned that the recent resurgence of Covid-19 clouds “short-term prospects” in the region.
“Per capita income will not return to pre-pandemic levels before 2024, resulting in cumulative losses of 30% compared to the pre-pandemic trend,” Alejandro Werner, director for the Americas at the IMF, and two other economists said in an IMF blog.
In its latest “World Economic Outlook” (WEO) report published this month, the IMF improved the outlook for Latin America, projecting a regional GDP growth of 4.6% this year, a figure still below the global average of 6%.
In terms of economic growth, the IMF warned that “the recent outbreak of the virus in Brazil, Chile, Paraguay, Peru and Uruguay, coupled with the slow distribution of vaccines (except in Chile), clouds the short-term outlook.”
The economists highlighted that the 7% contraction experienced by the region in 2020 was the sharpest in the world, far exceeding the global average of -3.3%, and added that the growth forecast for this year is below the projections for emerging markets.
According to the agency’s forecasts, Brazil – which will grow 3.7% this year – will recover its 2019 GDP level in 2022; Mexico, with a forecast expansion of 5%, will return to the pre-pandemic level in 2023, as “there is no solid fiscal support and investment weakness is expected to continue.”
The IMF highlighted the case of Chile, which will grow 6.2% and where the vaccination program is one of the most advanced in the world. “In Chile, the speed of vaccination and the important support policies are a short-term reinforcement. The country is expected to reach its pre-pandemic GDP level later this year,” the economists said.
The organization’s experts predict that the relief plan promoted by the United States will have positive effects for some Central American countries through trade and remittances and that these nations will return to the pre-pandemic GDP level in 2022.
“Caribbean economies dependent on tourism will be the last to recover (not before 2024) due to the slow resumption of activity in this sector,” the economists warned.
“Lasting deterioration of human capital”
The IMF warned that labor markets remain fragile: “only two-thirds of those who lost their jobs at the beginning of the pandemic in Brazil, Chile, Colombia, Mexico and Peru had regained them by the end of last year.”
He also noted that the informal sector – which recorded the greatest losses – has led the recovery in employment.
The experts also pointed out that the closure of schools, which was more prolonged than in other regions, will result in a “lasting deterioration of human capital”.
According to the IMF technicians’ analysis, the income of students aged 10 to 19 could be, on average, 4% lower over their lifetime, if the school days lost in 2020 are not compensated.
Source: Infobae