Latin America will recover the level of per capita income it had before the pandemic, only in 2024, estimated this Thursday the International Monetary Fund (IMF), which warned that the recent outbreak of covid-19 tarnishes “the short-term prospects” in the region.
“Per capita income will not return to the level before the pandemic until 2024, which will cause accumulated losses of 30% compared to the pre-pandemic trend,” Alejandro Werner, director for the Americas of the IMF and others, indicated in a blog of the entity. two economists.
In its latest “World Economic Outlook” (WEO) report released this month, the IMF improved the outlook for Latin America, projecting regional GDP growth of 4.6% this year, still below average. overall of 6%.
Thus, in terms of economic growth, the IMF warned that “the recent outbreak of the virus in Brazil, Chile, Paraguay, Peru and Uruguay, added to the slow distribution of vaccines (except in Chile), tarnishes the short-term prospects term”.
Economists highlighted that the 7% contraction experienced by the region in 2020 was the most pronounced in the world, far exceeding the world average, which was -3.3%, adding that the growth forecast for this year is below of the forecasts for emerging markets.
According to the agency’s forecasts, Brazil – which this year will grow by 3.7% – will recover the GDP level of 2019 in 2022; Mexico, with a forecast expansion of 5%, will return to the pre-pandemic level in 2023, since “there is no solid fiscal support and weak investment 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 constitute a reinforcement in the short term. The country is expected to reach the level of GDP prior to the pandemic this year,” the economists said.
Regarding the third early withdrawal of private pension funds, which the Chilean Congress is processing for citizens to face the pandemic, the Fund reiterated that it does not consider this measure “convenient”.
“It is not necessary and it is also not the appropriate vehicle, it is to continue deteriorating a structural factor of the pension system,” Werner said in a virtual press conference.
The entity’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 in these nations they will return to the GDP level prior to the pandemic in 2022.
“Caribbean economies that depend on tourism will be the last to recover (it will not be until 2024) due to the slow resumption of activity in this sector,” the economists warned.
– “Lasting deterioration of human capital” –
Werner also warned that after the pandemic “the economies of Latin America are going to face a significant fiscal challenge in the medium term” because they will have “significantly higher debt levels” than they had before.
“This is going to make these economies more vulnerable to changes in both domestic and international interest rates,” explained the economist.
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 recovered it at the end of last year.”
He also highlighted that the informal sector – which was the one that registered the greatest losses – has led the recovery in employment.
The experts further noted that the closure of schools, which was longer than in other regions, will mean a “lasting deterioration of human capital.”
According to the analysis of IMF technicians, the income of students between the ages of 10 and 19 could be, on average, 4% lower throughout their lives, if the days missed in 2020 are not compensated .