Latin America is experiencing a faster-than-expected economic recovery this year, but will weaken more than expected in 2022, according to the latest global economic outlook report (WEO in its acronym in English) International Monetary Fund. The gross domestic product (GDP) of Latin America and the Caribbean will grow, on average, 6.3% this year -0.5% more than the multilateral forecast in July -. The forecast for next year was lowered by 0.2%, due to the difficulties that developing countries are experiencing in vaccinating their population against covid-19.
The forecasts for Brazil and Mexico, the two largest economies in the region, worsened. Brazil will grow 5.2% this year and 1.5% in 2022, while Mexico will grow 6.2% this year and 4% next year. For their part, countries linked to the trade of raw materials will grow stronger: Peru will grow 10% this year and 4.6% the next, while Chile will see growth of 11% this year and 2.5% in 2022 .
The economic recovery after the dramatic contraction experienced is outlining two growth rates between developed and developing countries, points out the report from the multilateral, whose headquarters are in Washington, DC. This discrepancy can be “dangerous,” warns the report published Tuesday.
“The dangerous divergence in economic prospects between countries remains a major concern,” the organization’s economists and experts wrote. The IMF expects aggregate production for the group of advanced economies to regain its pre-pandemic trajectory in 2022 and exceed it by 0.9% in 2024. By contrast, aggregate production for emerging and developing markets (excluding China) will be it will remain 5.5% below the forecast before the pandemic in 2024. “This will result in a further setback for improvements in the quality of life of the inhabitants,” said the Fund. “These economic divergences are the consequence of great disparities in access to vaccines and in support for supportive policies,” he added.
The Fund emphasized that almost 60% of the population in advanced economies is fully vaccinated and, while some of their inhabitants are already receiving booster injections, around 96% of the population in low-income countries remain unvaccinated. . Emerging economies have also faced stricter financing conditions and a higher risk of de-anchoring inflation expectations, which pushed governments to withdraw aid policies early.
Furthermore, estimates from the International Labor Organization suggest that Latin America and the Caribbean, along with South Asia, are among the regions where the reduction in working hours in 2020 were particularly large.
“The outlook for the group of low-income developing countries has been clouded considerably due to the worsening dynamics of the pandemic,” the report says. On the one hand, short-term prospects are difficult for advanced economies, partly due to supply disruptions caused by the pandemic and social distancing measures. “Pandemic-related disruptions in contact-intensive sectors have caused the labor market recovery to lag significantly behind production recovery in most countries,” the organization added.
Vaccines are urgently needed for all
“Recent events have made it very clear that we are all in this together and that the pandemic does not end anywhere 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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