By: Staff Writer
October 11, 2022
An Inter-American Development Bank top official said there was a false choice between saving lives and the economy during the COVID-19 pandemic, but there really was “no dilemma,” in the Latin American and Caribbean (LAC) region.
Eric Parrado Herrera, chief economist and general manager of the Research Department at the IDB, said at the summit for South Korea and LAC that while there were opportunities for development coming out of the COVID-19 pandemic and in the midst of the Russia/Ukraine War there are “complex, pre-existing conditions” that need to be addressed. He also said that the pandemic “exacerbated” these conditions.
He added: “It paralyzed human mobility, international trade and financial flows. The impact was unprecedented with only 8 percent of the world’s population, the region has accounted for 25 percent of global deaths from COVID-19 and in 2020, the contraction of the gross domestic product reached 7 percent, the largest drop in economic growth in the region in a single year since 1821.”
Mr Herrera also said: “At the beginning of the pandemic, the false choice between saving lives and saving the economy was discussed in some countries. In Latin America and the Caribbean, there was no such dilemma, because both dimensions suffered, and a lot.
“At the end of 2020, the region had the worst performance in the world in handling the health crisis, and also suffered the worst contraction of its economy. The pandemic continued to be critical in 2021, and Latin America and the Caribbean remained the region with the most deaths per 100,000 inhabitants. However, economic activity recovered at a good pace as a result of the counter cyclical measures that many countries implemented in the area of fiscal, monetary and financial policies.”
Growth in the region is expected to slow sharply to 2.5 percent in 2022, following a post-pandemic rebound of 6.7 percent in 2021, where most countries that were tourism dependent benefitted from revenge tourism and pent up demand from consumers in larger markets that decided they wanted to travel in waves and out of their general tourism season and patterns.
Me Herrera also said: “Now when we compared the accumulated growth between 2021 and 2019, and the accumulated death since the start of the pandemic, we see that the region seems to be the most affected by the health and economic crisis in these two years.”
As of April the Pan American Health Organisation said that Two-thirds of people in Latin America and the Caribbean now vaccinated against COVID-19, which is important because early on vaccination opponents were skeptical of the various vaccines on the market for the region.
Mr Herrera later also said: “. With few exceptions, te region emerge from the COVID-19 crisis poorer, more indebted, and with… severe damage. Having not yet fully recovered from this, the region is now facing a new shock, the war in Ukraine. This shock is affecting the economies of the region through different channels.
He continued, “The increase in the price of commodities, has accelerated inflation throughout the world, which was already on the rise before the World Bank has encouraged a tightening of monetary policy in the US. This has caused a further slowdown in the world economy and an outflow of investment from emerging economies, consequently weakening regional currencies and deteriorating external accounts.
“This difficult situation is causing a slowdown in global economic activity, particularly affecting LAC. IDB calculations show that this situation will leave us even further below from pre pandemic GDP trends. As we mentioned, the economic slowdown occurs similar desperately with a strong inflationary pressures. These are not explained solely by the war in Ukraine. In fact, inflation began to accelerate from mid 2021, largely as a result of a significant recovery in aggregate demand after the pandemic, accompanied by strong fiscal stimulus that in many cases have not yet been withdrawn.
“Indeed, inflation in the region has risen sharply, reaching 13.3 percent In June, well above the increases of served in 2019 and 2020 of 7.3 percent and 5.9 percent respectively.
“This situation has pushed up inflation expectations for this year above the country’s inflation target ranges. However, the market expects that by 2023, inflation will return to one digit inflation and much closer to the inflation targets. To keep it this way, central banks must continue to send clear signals that allow inflationary expectations to remain anchored.
In addition to inflation, the work has also had important implications for world trade. Depending on the export orientation, the crisis could extract in some countries be it higher commodity exports or higher tax revenues, at least in the short term.”