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COVID-19 will drive record Latin America recession

Tuesday, June 30, 2020

Latin America is now the global hotspot for the pandemic, with over 2mn cases and 100,000 deaths

COVID-19 cases have tripled across Latin America over the past month ... while the likely economic cost is set to dwarf the impact of the 2008-09 financial crisis

Source: European Centre for Disease Prevention and Control; IMF; Pew Research Center; World Bank

Outlook

The world’s most urbanised and unequal region, Latin America is struggling to contain the spread of COVID-19, especially in urban slum areas also hardest hit economically by lockdowns.

In April the IMF estimated a 2020 regional contraction of 5.2%. It now estimates a fall of 9.4% and a rebound of only 3.7% in 2021.

Despite increasing economic damage and the apparent failure to halt the pandemic, in part given population density and the difficulty of halting movement in large informal economies, governments have limited options to ease lockdowns, with case numbers rising sharply and the peak still weeks away.

Impacts

  • Popular acceptance of lockdowns will become increasingly frayed as the impact on livelihoods deepens.
  • The socio-economic fallout from the pandemic will worsen existing deep levels of poverty and inequality.
  • Global recession will worsen the effect: remittances to the region may fall by 19%, compared to 11% in 2009.
  • Regional governments lack the financial firepower to supply sufficient social aid or economic stimulus.

See also