Latin America and the Caribbean is the region most affected by the COVID-19 pandemic, and at risk of seeing the socio-economic gains of recent decades reversed, a new report has warned.
The Latin American Economic Outlook (LEO) 2021 was produced by the Organisation for Economic Co-operation and Development, and the United Nations Economic Commission for Latin America and the Caribbean.
The report said recovery strategies must consist of timely reforms that promote universal social protection systems, accelerate the formalisation of economies, improve fiscal progressivity, and deepen regional integration.
Pandemic worsened structural challenges
A special section on the Caribbean highlighted that even before the pandemic, the region’s economies produced only modest growth coupled with high indebtedness, a significant exposure to natural hazards and a dependence on tourism and food imports.
Structural challenges in the Caribbean, such as slow growth, low tax revenues and high debt levels, have been aggravated by the impact of COVID-19.
During the pandemic, external shocks like the collapse in trade were tempered by the temporary decline in energy prices, but many countries also experienced a decrease in remittances. Key industries impacted were tourism, transport, restaurants and entertainment.
In addition, COVID‑19 has led to greater poverty and income inequality, and exacerbated other vulnerabilities and inequalities in the Caribbean, such as access to information and communications technologies (ICT); access to education services; food insecurity; and vulnerability of women and girls, with a significant increase in gender‑based violence, the report noted.
Economic growth remains heterogeneous across the Caribbean economies, although practically all of them will register growth in 2021.
Regionally, growth in 2021 is forecast to reach 5.2%, which will not be sufficient to compensate for the 7.6% contraction of 2020 and regain the level of output recorded in 2019.
Debt levels are rising
Meanwhile, government debt has increased across the Caribbean, which is already one of the most indebted regions in the world.
Of the seven countries where data were available, three had debt‑to‑GDP ratios of over 100% at the end of 2020. They were Barbados (144%), Belize (131%) and Jamaica (103%)
This high government debt consumes a significant portion of tax revenues.
From 2009‑18, average debt service as a percentage of government income exceeded 40% in three countries in the Caribbean: Antigua and Barbuda, Barbados and Jamaica.
Poverty increased
In Latin America, the crisis has also affected the most vulnerable groups. As a result, poverty and extreme poverty levels are at their highest in 20 and 12 years, respectively.
The report highlights that only 38% of citizens trusted their governments in 2020, down from 45% in 2010. Social discontent remains a key concern, as reflected by protests in some countries in the region.
Moreover, satisfaction with public services, including education and health, markedly decreased during the pandemic.
As a response, the report explores policy actions to rethink the social contract in the region.
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