IMF: Latin America rebound imperiled by virus resurgence

The economic rebound forecast for Latin American this year faces risks from the recent resurgence of Covid-19 and slow vaccine roll-outs, the International Monetary Fund said.

The continuance of the health crisis in many countries casts a shadow over the near-term outlook for the region, IMF officials including Alejandro Werner, the Western Hemisphere director, wrote in a blog post published Thursday. Income per capita for the region won’t return to its pre-pandemic level until 2024, resulting in a 30 percent loss relative to the pre-virus trend.

Brazil will recover its pre-pandemic level of output in 2022, along with some Central American countries that benefit from trade and remittances resulting from US fiscal stimulus. Mexico will recover in 2023, with tourism-dependent Caribbean economies the last to recover in 2024.

Peru will grow the fastest at 8.5 percent in 2021, followed by Chile at 6.2 percent, 5.8 percent for Argentina, 5.1 percent for Colombia, 5 percent for Mexico and 3.7 percent for Brazil. The region will grow 4.6 percent, 0.5 percent more than forecast in January but below the 5.8 percent average for emerging markets excluding China, the IMF said in last week’s update of the World Economic Outlook.

Poverty in the region is expected to have grown by 19 million people – about equivalent to the entire population of Chile or Ecuador.

The pandemic is expected to leave long-lasting damage through school closures, which were longer than in other regions. Students aged 10 to 19 might expect four percent lower income on average over their lifetimes if the lost school days from 2020 are not made up, the IMF said, with students in Brazil among the most affected of the largest economies. The educational losses will worsen income inequality and already low levels of education, the Fund said.

Countries in the region should maintain supportive fiscal and monetary policies where possible, while those with tight budgets should re-prioritise spending toward healthcare and support for households. Healing longer-term scars will require structural changes to improve access to high-quality education and healthcare, the Fund said.