Coherent policy response needed to overcome Coronavirus crisis in Latin America and the Caribbean

The Latin America and Caribbean (LAC) region is seeing a sharp decline in growth due to the Covid-19 (coronavirus) crisis, which requires several policy responses to support the most vulnerable, avert a financial crisis, and protect jobs, according to a new report from the World Bank.

To help the vulnerable face the loss of earnings from the lockdown, existing social protection and social assistance programs should be rapidly scaled up and their coverage extended, according to “The Economy in the Time of Covid-19,” the latest semiannual report from the World Bank’s Chief Economist Office for Latin America and the Caribbean.

At the same time, governments may need to support financial sector institutions and key sources of employment.

We need to help people face these enormous challenges and make sure that financial markets and employers can weather the storm,” said Humberto López, World Bank Acting Vice President for the Latin America and the Caribbean Region. “That means limiting the damage and laying the groundwork for recovery as fast as possible.

A series of shocks hit economic growth in LAC over the past year starting with social unrest, the collapse of international oil prices, and now the COVID-19 (coronavirus) crisis. Growth is suffering as a result.

Gross Domestic Product (GDP) in the Latin America and Caribbean region (excluding Venezuela) is expected to be -4.6% in 2020, according to the report.* A return to growth of 2.6% is expected in 2021.

The coronavirus pandemic is fueling a major supply shock. Demand from China and G7 countries is falling dramatically, affecting commodity exporters in South America and exporters of manufactured goods and services in Central America and the Caribbean. A collapse in tourism is severely impacting some countries in the Caribbean.

Many countries in LAC are confronting the crisis with a constrained fiscal space. Higher levels of informality make it difficult to reach out to all households and protect all sources of employment. Many households live from hand to mouth and do not have the resources to cope with the lockdowns and quarantines needed to contain the spread of the pandemic. Many also depend on collapsing remittances. To help the vulnerable face this economic challenge, existing social protection and social assistance programs should be rapidly scaled up and their coverage extended.

At the same time, governments will have to take on the burden of much of the losses. Socializing the losses may require taking ownership stakes in financial sector institutions and strategic employers through recapitalization. This support will be key to preserving jobs and allowing for a recovery.

However, these processes need to be transparent and strong arrangements need to be put in place to manage the newly acquired assets, building on the best examples of sovereign wealth funds and asset management companies.

“Governments across Latin America and the Caribbean face the enormous challenge of both protecting lives and limiting the impact of the economic fallout,” said Martín Rama, World Bank Chief Economist for the Latin America and the Caribbean region“This will require coherent, targeted policies on a scale rarely seen before.”

World Bank Group Global Support to Face the Coronavirus Crisis:

The World Bank Group is taking broad, fast action to help developing countries strengthen their pandemic response, increase disease surveillance, improve public health interventions, and help the private sector continue to operate and sustain jobs. It is deploying up to $160 billion in financial support over the next 15 months to help countries protect the poor and vulnerable, support businesses, and bolster economic recovery.

*Due to the COVID-19 pandemic, economic circumstances within countries and regions are fluid and change on a day-by-day basis. The analysis in the report is based on the latest country-level data available as of April 10, 2020.

 

Link to the full report:

https://openknowledge.worldbank.org/bitstream/handle/10986/33555/9781464815706.pdf

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2 Comments

  1. I MUST Admit
    April 14, 2020

    Boy when I saw how PM Skerrit was literally dumping our money during the election I knew somehow we would be punished because God is too much of a just God to allow us to not pay for that. To be honest with you I was very disappointed UWP did not win the election to kind of give us another chance but I was comforted when it really dawned on me that our judgement would come and as a result, God would not judge Dominica for the iniquities of Roosevelt Skerrit. No wonder the very first country that was attacked was China, where Skerrit had all of his eggs hatching. During the campaign Skerrit told us that China was going to build international airport for him and so many lies. Now I say thank God Skerrit STOLE the election and those from the DIASPORA that came down to help him do the Evils the bible tells us we should disassociate ourselves from will see that God is how God doesn’t reward Evil with good. So Skerrit like the wheels of Chariots of Pharoah God attacked, yours are attacked

  2. Trouble I see
    April 14, 2020

    As for Dominica we will feel it more than any other country for the following reasons:
    1. We seem to have made a lot of money through the sale of our passports and PM squandered our money to stay in power, not thinking there would be a tommorow.
    2. God gave every country their their gift to feed their people; what he gave us was rich soil and abundance of water. Unfortunately, to ensure he stays in power PM allowed Agriculture to die so we could depend on him
    3. PM moved us from an agricultural country to a Tourism country and now there is no tourism.
    4. Ross University was like a sure bird in the hand that could help us after the Covid-19 and somehow Skerrit shipped Ross to Barbados
    5. Skerrit chased our all our friends so he could be in bed with China only to find out that China was badly hit by COVID-19 is badly in need of help, though they never had intentions of helping us out of poverty
    6. All our friends like Maduro are in deep trouble, CBI is dead,we have no where to turn

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