Coronavirus will cause historic blow to Latin America's economy, says ECLAC

Reuters - The coronavirus pandemic will cause a historic 5,3% drop in the Latin American and Caribbean economy in 2020, leading to the region's worst social crisis in decades, with millions of newly impoverished and unemployed, ECLAC reported on Tuesday.

  In a report assessing the effects of the pandemic, the United Nations agency revised regional figures, warning that the greatest impact will be in South America, due to its high dependence on exports to China and commodity prices, and in Mexico, with an expected contraction of 6,5% this year.

  In December, the Economic Commission for Latin America and the Caribbean (ECLAC) had estimated that the regional economy would grow by 1,3% this year, already amidst a general slowdown. Now, it predicts that 19 of the 20 Latin American economies and 31 of the 33 in the region and the Caribbean will shrink.

  “The crisis in the region in 2020, with a 5,3% drop in GDP, will be the worst in history,” stated ECLAC. “To find a contraction of comparable magnitude, one has to go back to the Great Depression of 1930 (-5%) or 1914 (-4,9%),” it added.

  The regional decline will leave nearly 30 million more people in poverty and increase levels of extreme poverty, the agency warned, which also predicts that the unemployment rate will be around 11,5%, an increase of 3,4 percentage points compared to the 2019 level, representing 37,7 million people.

  Latin America has recorded more than 100 cases of coronavirus transmission, according to a Reuters tally based on official data. The outbreak "will cause the region's biggest economic and social crisis in decades, with very negative effects on employment, the fight against poverty and the reduction of inequality," it stated.

  In the report, ECLAC recalled that the region had already shown weak performance in the previous five years, with growth of 0,4% in the period 2014-2019, the lowest since the 1950s.

  The coronavirus is hitting Latin American countries at a time when they have little room to increase fiscal spending, due to rising debt, increased interest payments, and limited tax revenue.

  "Currently, public revenues will be further affected by the sharp contraction in economic activity and lower commodity prices," he stated.

  According to estimates released on Tuesday, the Brazilian economy will fall by 5,2%, compared to a previous estimate of a 1,7% increase, and Argentina's economy will fall by 6,5%, compared to a previous estimate of a 1,3% drop.