The Latin American and Caribbean countries face a “significant risk” of social unrest by the impact of the pandemic on their already stagnant economies, and must ensure growth that takes into account inequities, they warned on Monday IMF experts.
“With an intense electoral calendar looming, social unrest remains a major risk and inequality will need to be addressed,” warned economists at the International Monetary Fund (IMF).
Costa Rica, Colombia and Brazil will hold general elections this year.
Seeking policies to revive economic expansion With an emphasis on social inclusion, it must go hand in hand with the fight against inflation, they also said, underlining that 2021 was marked by the strong increase in prices in the region.
In a post on the IMF blog, they indicated that the covid-19 pandemic declared in 2020 hit Latin America and the Caribbean “after a year of widespread social unrest, accumulated during the years of economic stagnation that followed the end of the commodity boom”, recorded for a decade until 2013.
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The article, signed by Ilan Goldfajn, who took office this month as director of the IMF’s Department for the Americas, analyzes the slowdown in growth in the region forecast last week by the Fund, to 2.4% in 2022 (-0.6 percentage points compared to what was forecast last October).
Goldfajn, the deputy director of the Department of the Americas, Jorge Roldós, and the deputy head of regional studies, Anna Ivanova, pointed out that the strong recovery of Latin America and the Caribbean in 2021, of 6.8% after the dramatic contraction of 7% in 2020 , is losing momentum and reforms are needed.
“The countries of the region must simultaneously face three great challenges: ensuring the sustainability of public finances; increasing potential growth; and doing so in a way that promotes social cohesion and addresses social inequalities,” they said.
Addressing these challenges, which have been dragging on even before the health emergency, also means challenge of lowering inflation.
In 2021, prices increased by 8.3% in some of the large regional economies (Brazil, Chile, Colombia, Mexico and Peru), “the largest jump in 15 years and higher than in other emerging markets”, highlighted the experts.
They specified that the main central banks reacted “quickly and decisively” to the strong increase in consumer prices, tightening monetary policy.
But with short-term inflation expectations elevated, constant vigilance and eventual additional interest rate hikes will be required, all “accompanied by clear and transparent communication,” they said.
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