Business & Economy

ECLAC estimates 5.3 pct. economic contraction in LatAm in 2020 from COVID-19

Santiago, Apr 21 (efe-epa).- Latin America will undergo a 5.3 economic contraction in 2020 because of the coronavirus pandemic, with some 11.6 million new unemployed and almost 30 million more “poor,” the Economic Commission for Latin America and the Caribbean (ECLAC) estimated on Tuesday.

The economic downturn among the region’s main trade partners, the fall in the prices of primary materials and the blow to key sectors such as tourism will make this downturn “the worst in its entire history,” the Santiago-based United Nations agency said. “To find a contraction of comparable magnitude, you need to go back to the Great Depression of 1930 (-5 pct.) or even more to 1914 (-4.9 pct.).”

The hardest-hit countries will be Venezuela (-18 pct.), Mexico (-6.5 pct.), Argentina (-6.5 pct.), Ecuador (-6.5 pct.), Nicaragua (-5.9 pct.) and Brazil (-5.2 pct.), according to the report.

In the middle range are Chile (-4 pct.), Peru (-4 pct.), Uruguay (-4 pct.), Cuba (-3.7 pct.), Costa Rica (-3.6 pct.), Haiti (-3.1 pct.), El Salvador (-3 pct.), Bolivia (-3 pct.) and the Caribbean islands (-2.5 pct.).

The other countries of the region should suffer less economic disruption with the Dominican Republic (0 pct.) moving through the crisis with the least difficulty.

Labor indicators will also be hit hard with unemployment increasing to about 11.5 percent, a 3.4 percent hike from 2019, and the number of people out of work totaling some 37.7 million, 11.6 million more than last year.

ECLAC calculates that the poverty rate will rise this year from 30.3 percent to 34.7 percent, an increase of 28.7 million people who will drop below the poverty line.

The forecast for extreme poverty is also discouraging, with ECLAC expecting an 11 percent increase to 13.5 percent, which translates into an increase of 16 million people.

ECLAC also warned that remittances being sent back to Latin America could decline by 10-15 percent this year and could take 4-8 years to move back up to the 2019 level.

Remittances amount to 30 percent of Haiti’s GDP, while in El Salvador and Honduras the figure is about 20 percent.

The UN agency said that emerging from the crisis will depend on the economic strength of each individual country, but “asymmetries” in the region mean that entities like the International Monetary Fund and the World Bank will assume greater importance in guaranteeing access to financing and sustaining social spending.

“In the current crisis, tax revenues will be even more affected by the strong contraction in economic activity and depressed prices for raw materials,” the report said.

The region, with its 626 million people, is considered the most economically unequal in the world and is facing the pandemic at a moment of weakness in its overall economy and macroeconomic vulnerability, with economic growth amounting to barely 0.1 percent in 2019.

Prior to the Covid-19 pandemic, ECLAC forecast that the region would grow by a maximum of 1.3 percent in 2020.


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