RIO DE JANEIRO, BRAZIL – More damage than any other region in the world, both in health and economy, was suffered by Latin America and the Caribbean last year, as a consequence of Covid-19. This is the starting point for the World Bank’s analysis of the current scenario, which states that this translates into a drop in regional Gross Domestic Product (GDP) estimated to have reached 6.7% last year.
But as the first year of the pandemic is being left behind, the international organization foresees a moderate rebound for what is to come – 4.4% in 2021, revised upwards from the 3.7% contemplated by the entity at the beginning of January.
The biannual report “Back to Growth” once again places Chile above its neighbors, and also strongly revises upwards the outlook since the last fiscal year. The international lender now sees Chilean GDP expanding 5.5% in 2021, up sharply from the 4.2% forecast just a few months ago.
By 2022 the outlook would moderate, but the Chilean economy would still grow 3.5%, above the 3% projected by the bank for the entire region. The following year, however, the expansion would be only 2.5%, two tenths below the regional average (2.7% in 2023).
Although the projection is optimistic, it is more conservative than that made by other external agencies. The International Monetary Fund (IMF), for example, projects that national activity will grow 6% in the current year, a figure that was revised upwards this month.
Despite the overall more positive outlook, the bank also reminds us that the pandemic is not over. “While there are signs that the region’s economies are recovering and hopes that this disruption will have some positive outcome, the outlook for this year remains uncertain,” says the report, which warns that vaccination has progressed “slowly” in the region, which would imply that herd immunity will not be achieved until the end of this year.
“Also, new waves of infections may occur as new variants of the virus emerge. As we actively prepare to build back better, the priority remains to protect human life and livelihoods,” the institution reminds.
Regional leaders
For the World Bank, Chile will not be the fastest growing economy in Latin America this year. Beyond the strong rebound that some Caribbean countries would experience, the region should be led by Peru, which could rebound 8.1% this year, and would moderate its expansion to 4.5% in 2022.
If a few months ago the bank estimated that Argentina’s recovery would be smaller in magnitude than Chile’s, the scenario has turned around, and the trans-Andean country would achieve an increase of 6.4% in 2021, more than two percentage points above what was contemplated in January. Next year, however, GDP would rise by only 1.7%, only to rebound by a couple of tenths of a percentage point in 2023.
The other Latin American countries would not manage to exceed the growth expected by the bank for Chile, but they did improve their outlook. Colombia, for example, would expand 5% this year, and although the scenario would moderate in the coming years, the increase would be 4.3% in 2022 and 4.2% in the following period.
Mexico, meanwhile, would grow 4.5% this year, falling to 3% and 2.5% in the following years, while Ecuador and Uruguay would see GDP growth of 3.4% in 2021. Brazil, which managed to shrink its economy to a lesser extent than the rest of the region, would suffer one of the lowest rebounds in the region, of only 3% this year, which would drop to 2.5% in 2022 and 2.3% in 2023.
Beyond the short term, the report warns that “the Covid-19 crisis will have a long-term impact on the region’s economies,” specifying that “lower levels of learning and employment are likely to reduce future incomes, while the high level of public and private indebtedness may cause stress in the financial sector and slow the recovery.”
Source: Diario Financiero