By: Staff Writer
January 5, 2024
The Organisation for Economic Co-operation and Development (OECD) in their Latin American Economic Outlook for 2023 said that despite the strong rebound post pandemic, challenging social conditions remain as inflation has hurt poor and driven them deeper into poverty.
The OECD said: “Although the relatively strong economic recovery in LAC came with an increase in employment and household income, challenging social conditions remain. Increased inflation eroded purchasing power, especially for the poorest, and poverty and extreme poverty in the region remain above pre‑pandemic levels in more than half of LAC countries. In 2022, 29 percent of the population was in poverty and 11.2 percent in extreme poverty. One of the main challenges to address this situation is labour informality, entailing lower wages and lack of access to social protection systems. Before the pandemic, 42.8 percent of the LAC population lived in a household that depended entirely on informal employment and 21.8 percent lived in mixed households, i.e. households with both formal and informal workers. This implies that 64.6 percent of the regional population depended totally or partially on informal employment. Similarly, inequality in income distribution in Latin America, measured through the Gini index, remained relatively high and stagnant between 2017 and 2021; it did show a slight improvement from 0.46 in 2020 to 0.45 in 2022.”
Inflation has been the post-pandemic fly in the ointment that is the economic rebound that has been marked by increased travel as well as higher than normal consumer spending. All of the countries in the LAC are dependent on external markets to a significant degree and this was not missed by the OECD.
The OECD further said: “After the post-pandemic rebound in growth experienced in 2021 in LAC, external conditions became less favourable, public transfers were reduced, monetary policy tightened and the effects of the reopening of economies dissipated in 2022. The deceleration of economic activity in LAC in 2023 suggests that the region is returning to the low levels of growth seen in the years before the pandemic. Socio-economic conditions remain challenging in LAC, with poverty (29 percent) and extreme poverty (11.2 percent) still above pre-pandemic levels in more than half of LAC countries in 2022. One of the main challenges to addressing this situation is labour informality, entailing lower wages and lack of access to social protection networks. On average, 42.8 percent of the region’s population lived in a household that depended only on informal employment. Moreover, purchasing power in LAC has been progressively eroded by increased inflation, with a more severe impact on the most vulnerable populations. In the first six months of 2023, households in extreme poverty confronted an average price increase that was around 4.0 percentage points higher than for average households.”
The report also noted, notwithstanding the economic rebound immediately post-pandemic, “Economic activity in Latin America and the Caribbean (LAC) has slowed in 2023. Following the contraction caused by the COVID-19 pandemic, gross domestic product (GDP) growth in the region had rebounded to above 6 percent in 2021. This expansion was mainly due to fiscal and monetary stimuli, improved external conditions and base effects. In 2022, external conditions became less favourable, public transfers were reduced, monetary policy tightened and the effects of reopening economies dissipated. GDP grew by almost 4 percent on average in LAC in 2022, with most countries in the region regaining pre-pandemic GDP levels. Nevertheless, the deceleration of economic activity in 2023 suggests that the region is returning to the low levels of growth seen in the years before the pandemic.