Beyond the health emergency, the pandemic has dealt a severe blow to the economies of Latin America and the Caribbean. According to the World Economic Outlook report, it is estimated that our region will contract by 9.4% in 2020, which will constitute the worst recession in a long time, even deeper than that caused by the global financial crisis of 2008-09 and the debt crisis of the 1980s. For 2021, a slight recovery in growth is expected.
The COVID-19 pandemic caught the world by surprise, causing an unprecedented health emergency. Caribbean countries adopted containment measures to slow the spread of the disease and flatten the curve based on prior experiences and lessons around the world. Actions ranged from limits to social activities and closure of non-essential businesses, to curfew hours and complete lockdowns. While desirable from an epidemiological perspective, restricting social interaction has led to enormous economic costs and sparked the debate of "saving lives vs.
The adoption of the UN Sustainable Development Goals (SDGs) and the Paris Agreement principles on climate change provide a prime opportunity to promote a new form of development in Latin America and the Caribbean (LAC). Public investment in infrastructure and services can play a key role in LAC countries’ efforts to achieve sustainable and inclusive growth.
The coronavirus pandemic has presented governments with the challenge of implementing public health measures to contain the spread of the epidemic by promoting social distancing, forcing people to work from home, and closing schools, business and events as well as forcing quarantine measures.
The pandemic does not come to the region in good time, the little dynamism of growth in recent years generates uncertainty of the outlook for the future. For 2020, the consensus among analysts expects a drop in output in Latin America and the Caribbean between -2% and -6%, which comparative terms would be deeper contractions than the debt crisis of the eighties (-2.4%) and the international financial crisis (-2.1%). If this materialized, it would be the strongest recession in the last 60 years. The nature of the shock is mixed as it is a combination of supply and demand.
As is well known, COVID-19 is highly contagious and has a higher mortality rate among at-risk groups than other similar viruses. In Latin America and the Caribbean (LAC) the first contagion case was registered in late February 2020 and by April 20 the number of people infected was 100,000-plus, with 5,300 dead. Unfortunately, these figures quickly became outdated. The outburst originated in Asia, spread fast through Europe, and hit LAC’s economic activity hard, causing commodity prices and exports demand to plunge, triggering capital flights and pushing up financing costs.
Subnational governments (SNGs) in Latin America and the Caribbean (LAC) are on the frontline of the coronavirus pandemic. Their proximity to the population and to its needs and demands gives them a prime opportunity to gain early first-hand knowledge of the crisis’s evolution. In the region’s large countries, SNGs are directly responsible for the health response, managing public hospitals and emergency services.
The state-owned enterprise (SOEs) sector in Latin America and the Caribbean (LAC) is struggling financially and suffering from political intervention. More than 40% of such enterprises have reported annual losses for several consecutive years in the past decade. The crisis has had important, and sometimes de-stabilizing impacts in the region. For example, heavy losses at state-owned enterprises have hurt solvency of certain countries, forcing them to seek IMF financial support.