Contraction of C'bean economic activity intensifies due to COVID-19 — report

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Contraction of C'bean economic activity intensifies due to COVID-19 — report

Thursday, July 16, 2020

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SANTIAGO, Chile (CMC) — A new report by the Economic Commission for Latin America and the Caribbean (ECLAC) says that economic activity in the region has intensified due to coronavirus (COVID-19) pandemic.

According to ECLAC's Special Report COVID-19 No 5, “Addressing the growing impact of COVID-19 with a view to reactivation with equality: new projections”, since both external and domestic shocks have intensified, the region overall will experience a -9.1 per cent fall in Gross Domestic Product (GDP) in 2020.

The report says GDP will drop to -9.4 per cent in South America, -8.4 per cent in Central America and Mexico, and -7.9 per cent in the Caribbean, excluding Guyana, “the strong growth of which prompts a smaller contraction in the sub-regional total (-5.4 per cent)”.

ECLAC said the document sustains that the fall in economic activity is of such a magnitude that GDP per capita in Latin America and the Caribbean will end 2020 at a level similar to what was seen in 2010 – meaning that there will be a setback of 10 years in income levels per inhabitant.

“A greater increase in unemployment is also foreseen now, which in turn will produce a significant deterioration in poverty and inequality levels,” said ECLAC Executive Director Alicia Bárcena in her presentation on Wednesday.

ECLAC said it is expected that the regional unemployment rate will be around 13.5 per cent by the end of 2020, which represents an upward revision (two percentage points) of the estimate presented in April and a 5.4 percentage point increase versus the 2019 figure (8.1 per cent).

With this new estimate, the ranks of the unemployed are seen swelling to 44.1 million people in total, which represents an increase of nearly 18 million people versus the level in 2019 (26.1 million unemployed persons), ECLAC said.

The report indicates that these figures are “significantly higher” than those observed during the global financial crisis, when the unemployment rate rose from 6.7 per cent in 2008 to 7.3 per cent in 2009 (0.6 percentage points).

In addition, the -9.1 per cent fall in GDP and the increase in unemployment are “seen having a direct negative impact on the income of households and their possibilities for obtaining enough resources to meet basic needs”, ECLAC said.

In that context, ECLAC forecasts that the number of people living in poverty will rise by 45.4 million in 2020, which means that the total number of people in that situation will go from 185.5 million in 2019 to 230.9 million people in 2020 – a figure that represents 37.3 per cent of Latin America's population.

Within this group, ECLAC said the number of people experiencing extreme poverty is seen rising by 28.5 million, going from 67.7 million people in 2019 to 96.2 million in 2020, a figure equivalent to 15.5 per cent of the total population.

ECLAC also forecasts greater inequality in income distribution in all of the region's countries: the Gini index is seen increasing by between 1 per cent and 8 per cent in the 17 countries analysed, and the worst results are expected in the region's biggest economies.

According to the report, countries in the region have announced major packages of fiscal measures to confront the health emergency and mitigate its social and economic effects.

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