IMF says coronavirus pandemic still casts shadows on most of Latin America and the CaribbeanThursday, October 21, 2021
WASHINGTON, United States (CMC) –The International Monetary Fund (IMF) Thursday said that an economic recovery is underway in Latin America and the Caribbean (LAC) but the coronavirus (COVID-19) pandemic still casts “shadows” on much of the region.
In its Regional Economic Outlook for Latin America and the Caribbean, the Washington-based financial institution said the recovery was robust in the first quarter of 2021 but lost momentum in some countries in the second quarter, reflecting the rebound in COVID-19 cases.
It said real gross domestic product (GDP) is projected to grow by 6.3 per cent in 2021, followed by a more moderate growth of three per cent in 2022, but would not catch up with pre-pandemic trends in the medium term as persistent weakness in labour markets raises risks of scarring.
“Broadly favourable external conditions, high commodity prices, and pent-up demand support short-term growth, while monetary and fiscal policy reversals work in the other direction. Risks to the outlook are tilted downward.
“Main downside risks are the emergence of more transmissible and deadlier COVID-19 variants, tightening of global financial conditions, sovereign debt rollover risks, and social unrest as a year with heavy election schedule looms,” the IMF added.
The IMF said that for tourism dependent countries in the Caribbean economic growth for this year would be 2.3 per cent, increasing to 4.1 per cent the following year. It said last year the Caribbean recorded minus nine per cent growth.
The IMF said the tourism dependent countries included Antigua and Barbuda, Aruba, the Bahamas, Belize, Dominica, Grenada, Haiti, St Kitts/Nevis, St Lucia and St Vincent and the Grenadines.
Regarding commodity exporters in the Caribbean such as Guyana, Suriname and Trinidad and Tobago, economic growth is projected to reach 5.6 per cent this year increasing to 21.1 per cent next year. It said that in 2020, these countries had recorded four per cent growth.
It said that fiscal policy should allocate sufficient resources for health spending, including vaccination, and continue to support households and firms in a more targeted fashion while the pandemic persists, backed by credible assurances of medium-term debt sustainability to maintain access to finance.
“Monetary policy has started to address inflationary pressures but should continue to support economic activity insofar as the dynamics of inflation expectations permit.
“Financial policy should shift from blanket support to targeted support of viable firms, to ensure that necessary labor and capital reallocations are not hindered. Supply-side policies should foster inclusive growth, including through progressive and growth-friendly tax reforms and measures to intensify climate change adaptation and mitigation,” the IMF said.