Latin America is experiencing a faster-than-expected economic recovery this year, but will lose more steam than expected in 2022, according to the latest World Economic Outlook report from the International Monetary Fund.
The gross domestic product (GDP) of Latin America and the Caribbean will grow, on average, 6.3% this year (0.5 percentage point more than the organism predicted in July), while for 2022 the forecast is 0.2 lower percentage point, due to difficulties observed in vaccination campaigns against covid-19.
Forecasts for Brazil and Mexico, the two largest regional economies, have worsened. Brazil will grow 5.2% this year (previously, the projection was 5.3%). In 2022, the projection indicates growth of 1.5%. Mexico will increase its GDP by 6.2% in 2021 and 4% in 2022.
The countries most dependent on commodities will grow stronger. This will be the case in Peru (10% this year, 4.6% next) and Chile (11% and 2.5%).
The economic recovery after the dramatic contraction during the pandemic reveals two different paces of growth, distancing developed countries from developing economies, according to the IMF report. This divergence can be “dangerous”, warns the report published on Tuesday.
“The dangerous disparity in economic prospects between countries remains a major concern,” wrote the organization’s experts. The IMF forecasts that aggregate production in the group of advanced economies will recover from its pre-pandemic trajectory in 2022 and exceed it by 0.9% by 2024. Aggregate production for emerging and developing markets (excluding China) will be maintained at 5.5% by 2024, below the prognosis prior to the pandemic. “This will result in a greater reversal of improvements in the quality of life of the inhabitants”, pointed out the Fund. “These economic divergences are a consequence of large disparities in access to vaccines and support policies,” the study added.
The IMF emphasizes that nearly 60% of the population in advanced economies is fully vaccinated, and while some of their inhabitants already receive booster shots, around 96% of the population in lower-income countries remain unimmunized. Emerging economies also faced stricter financing conditions and a greater risk of runaway inflation, which pushed governments to withdraw their assistance policies early.
Furthermore, International Labor Organization estimates suggest that Latin America and the Caribbean, along with South Asia, are among the regions where the reduction in working hours in 2020 was particularly large.
“The outlook for the group of low-income developing countries has greatly clouded due to the worsening dynamics of the pandemic,” says the report. On the one hand, short-term prospects are difficult for advanced economies, in part due to the supply disruptions generated by the pandemic and measures of social distancing. “The interruptions related to the pandemic in the intensive contact sectors caused the recovery of the labor market to significantly lag behind the recovery of production in most countries,” added the multilateral body, based in Washington.
Vaccination urgency for all
“Recent events have made it very clear that we are all in this together and that the pandemic will end nowhere until it ends everywhere,” wrote Gita Gopinath, the Fund’s chief economist, in the preface to the report.
“The world community must redouble its efforts to ensure equitable access to vaccines for all countries, overcome doubts about vaccines when there is an adequate supply, and ensure better economic prospects for all.”
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