Gross domestic product in the Latin America and Caribbean region, excluding Venezuela, is expected to shrink 4.6 percent in 2020, according to the World Bank.
Argentina's economy, in particular, will contract by 5.2 percent, the institution predicted.
The dramatic drop in demand from China and G7 countries due to the Covid-19 pandemic is affecting commodity exporters in South America and exporters of manufactured goods and services in Central America and the Caribbean. A collapse in tourism is also severely impacting some countries in the Caribbean.
"The governments of Latin America and the Caribbean face the enormous challenge of protecting lives and at the same time limiting economic impacts," said Martín Rama, chief economist at the World Bank for the Latin American and Caribbean region.
The sharp economic drop asks for “several policy responses to support the most vulnerable, avert a financial crisis, and protect jobs,” the World Bank said in a report called The Economy in the Time of the Covid-19, published Sunday. If governments manage to preserve jobs, the region should resume growth quickly and the GDP should expand 2.6 percent in 2021.
Brazil, the region’s largest economy, will be more affected. It’s poised to shrink five percent in 2020 and grow only 1.5 percent in 2021, according to the World Bank.
Mexico is expected to record a six percent decline, with GDP falls expected in Colombia (two percent), Chile (three perecent) and 4.7 percent in Peru.
The Dominican Republic is expected to remain stable, with growth anticipated only in Guyana. Uruguay's economy is expected to contract by 2.7 percent.
To help the most vulnerable, the region’s governments should scale up existing social protection and assistance programs and extend their coverage, taking on the burden of much of the losses. While those measures could come at the cost of fiscal austerity, governments need to step in to protect the big chunk of the population who have informal jobs and also, if needed, inject liquidity into financial institutions and strategic employers in exchange for ownership stakes, according to the document.
The World Bank is offering as much as US$160 billion in financial support for countries to counter the sweeping virus-fed crisis over the next 15 months.
The institution predicted a positive outlook for Latin America in 2021, with 2.6 percent growth anticipated next year.