ECLAC Projects 9.1 Percent Collapse of Latin American Economy Due to Pandemic

RIO DE JANEIRO, BRAZIL – The novel coronavirus pandemic is still not under control in Latin America and the Caribbean, which will lead the regional GDP to contract a record 9.1 percent in 2020 and raise the unemployment rate to 13.5 percent, reported the Economic Commission for Latin America and the Caribbean (ECLAC) on Wednesday.

The UN body, based in Santiago, had predicted in April that the drop would be 5.3 percent, but in its July report, it revised the collapse downwards and explained that, while there are countries like Uruguay or Paraguay that have restored a certain degree of normality and lifted the containment measures, “others have had to maintain or even step up the measures in view of the persistent increase in new daily cases of the disease.”

This is the worst contraction in economic activity since official records began, and it will translate into a drop in the region’s per capita GDP to 2010 levels, with a 9.9 percent plunge, according to the new ECLAC report.

With over 3.4 million people infected and nearly 350,000 deaths, the region is currently one of the world’s main pandemic hotspots.

The economies most affected will be those of Venezuela (-26 percent), Peru (-13 percent), Argentina (-10.5 percent), Brazil (-9.2 percent), Mexico (-9 percent), Ecuador (-9 percent), El Salvador (-8.6 percent), Nicaragua (-8.3 percent), Cuba (-8 percent) and Chile (-7.9 percent).

The middle and bottom of the table include Panama (-6.5 percent), Honduras (-6.1 percent), Colombia (-5.6 percent), Costa Rica (-5.5 percent), the Caribbean islands (-5.4 percent), the Dominican Republic (-5.3 percent), Bolivia (-5.2 percent), Haiti (-5 percent), Uruguay (-5 percent), Guatemala (-4 percent) and Paraguay (-2.3 percent).

Higher unemployment than in the Great Recession

Labor indicators will also suffer a significant deterioration: the unemployment rate will stand at approximately 13.5 percent, an increase of two percent over April’s projection, and 5.4 percent compared to 2019.

The number of unemployed will thus increase by 18 million when compared to last year and will reach 44.1 million people.

“These figures are significantly higher than those observed during the global financial crisis when the unemployment rate rose from 6.7 percent in 2008 to 7.3 percent in 2009,” warned the ECLAC.

As for poverty, the organization estimates that the rate will increase this year to 37.3 percent, with the number of people living in poverty rising from 185.5 million in 2019 to 230.9 million this year.

The highest growth in the poverty rate is expected to occur in Argentina, Brazil, Ecuador, Mexico, and Peru, while extreme poverty will increase by 28.5 million this year and will have a particular impact on women.

The ECLAC also alerted that inequality will increase, and that remittances to Latin America from abroad will be seriously affected; it also projected that the value of regional exports will drop by around 23 percent “mainly due to the intensified contraction in global demand.”

“Fiscal policy must play a central role in rebuilding a better reality for the region’s nations, with more inclusive, egalitarian, and resilient societies,” the organization said.

The 626 million inhabitants of the region, considered the most unequal in the world, are struggling with the pandemic at a time when their economies are faltering, with growth barely reaching 0.1 percent last year. Even before the COVID-19 outbreak, ECLAC projected that Latin America would grow by a maximum of only 1.3 percent in 2020.

Source: infobae

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