Latin America is recovering from the worst recession in two centuries

Photographer: Andre Coelho / Bloomberg

Latin America is facing risks as its economy recovers from its worst recession in two centuries, with a better fiscal policy needed to ensure a sustainable recovery, according to a area development loan.

Yield grows 4.1% this year as Vaccine distribution continues as businesses continue to open, the Inter-American Development Bank said in a forecast released Saturday at its annual meetings. The bank estimates that the 2020 austerity was at 7.4%, mostly for one year from 1821, when some Latin American countries were fighting for independence from Spain.

The area remains at risk for a quieter recovery where weaker growth in the US and Europe, slower immunization uptake and new virus strains will limit the 2021 expansion to 0.8%, according to the Washington-based foundation. That situation would return to decline in 2022 before growing in 2023 –- a “W” -shaped recovery.

Unemployment is high in Latin America, which is set to increase extreme poverty, and health systems are stretching to the breaking point. With just 8% of the world’s population, the region has accounted for about a quarter of coronavirus deaths.

“In 2019, the region was flying with a single broken engine,” said Eric Parrado, IDB’s chief economist. “In 2020, his other engine received a major blow. The challenge now is to fly this plane to safety, save passengers, and prepare for the necessary repairs. ”

Governments in the region provided nearly half a trillion dollars in fiscal assistance during the pandemic, with packages receiving an average of about 8.5% of gross domestic product, compared to 19% in advanced economies. That helped lift public debt to 72% of gross domestic product in 2020 from 58% a year earlier. The IDB predicts that public debt will rise to 76% by 2023.

Countries should pursue a fiscal review, with countries with both high tax and high spending benefiting from greater efficiency and better targeted social mobility programs. Countries should spend on projects with high social benefits and growth, build infrastructure for a digital economy and invest in a more environmentally sustainable future, the IDB said.

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