Future prospects for the world are improving, according to the International Monetary Fund (IMF), and Latin America is no exception. The region’s economy will grow 4.6% this year, according to the agency, half a percentage point more than its latest estimate, published in January. This is the second upward update that the Fund estimates for the region in a row. Advances in vaccination, the adaptability of some of the work to be done from home, and huge fiscal and monetary stimuli in the world’s major economies are driving a recovery somewhat faster than anticipated. In 2022, the rebound will be slower: for that year, the Washington-based organization expects Latin America to grow 3.3%, two tenths more than expected so far. In both cases, the upward revision is identical to that of the world as a whole.
“We now project a stronger recovery in 2021 and 2022 for the world economy compared to our previous forecast, with projected growth of 6% in 2021 and 4.4% in 2022,” the IMF said in its report. “However,” he adds, “the outlook presents enormous challenges related to divergences in the speed of recovery both within and within countries and the potential for persistent economic damage from the crisis.”
The two largest economies in the region, Mexico and Brazil, will grow this year by 5% and 3.7%, respectively. For 2022, the forecast is less optimistic, with a projection of 3% for Mexico and 2.6% for Brazil. “After a sharp drop in 2020, only a slight recovery is expected at various speeds in Latin America and the Caribbean in 2021,” say Fund experts. Thanks to the global rebound in manufacturing in the second half of 2020, growth exceeded expectations in some large exporting countries in the region such as Argentina, Brazil and Peru, raising the forecast for all of 2021 to 4.6%.
“However, the longer-term prospects continue to depend on the trajectory of the pandemic,” warns the multilateral. “With some exceptions, such as Chile, Costa Rica or Mexico, most of the countries have not obtained enough vaccines to cover their populations. In addition, the projections for 2021 for the Caribbean economies dependent on tourism have been revised downwards by 1.5 percentage points, to 2.4% ”. The IMF estimates that the region’s gross domestic product fell 7% in 2020.
“Despite the uncertainty about the path the pandemic will take, a way out of the health and economic crises is increasingly in sight,” the IMF report reads. As vaccines reach countries and the transmission of the new coronavirus that unleashed chaos in the global system is gradually reduced, human beings have been adapting their work to doing it from home, improving productivity and economic activity, ensures the report published on Tuesday. “Additional fiscal support in some economies (especially the United States) – in addition to an already unprecedented fiscal response last year and continually accommodative monetary policy – further improves the economic outlook.”
The contraction in activity in 2020 “was unprecedented in living memory for its speed and synchronized nature,” but the Fund assures that it could have been much worse. “Although it is difficult to say precisely, IMF staff estimates suggest that the contraction could have been three times greater had it not been for the extraordinary policy support. Much remains to be done to face the pandemic and avoid the divergence in per capita income between economies and the persistent increase in inequality within countries ”, closes the organization.