IMF predicts ‘broad impact’ of employment pandemic in Latin America

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The International Monetary Fund warned on Thursday (22) that the pandemic will have a strong impact on employment in Latin America, with a significant increase in poverty and a return to real income per capita prior to covid-19 only in 2025.

“The covid-19 shock is expected to have a broad impact on employment and eliminate some of the social progress made by the region by 2015,” said the IMF when publishing its latest economic prospects for Latin America and the Caribbean.

“Current estimates indicate lasting income losses and poverty is expected to increase substantially in 2020”.

The IMF estimates a contraction of the regional Gross Domestic Product (GDP) of 8.1% in 2020. But, unlike previous recessions, employment fell more strongly than GDP in the second quarter of 2020: more than 30 million people were left without work in Brazil, Mexico, Chile, Colombia, Mexico and Peru.

Job losses were most marked among women, especially in Brazil, Colombia and Peru, as well as among young people and low-skilled workers.

The incidence of the pandemic in informal employment was also severe, which in other recessions has acted as a buffer.

In countries highly dependent on tourism, such as the Caribbean, the pandemic was like a “cardiac arrest”, said the IMF.

Another lost decade?

The structural aspects of the Latin American labor market, where 45% of jobs are located in sectors with high social contact and teleworking is possible in only one in five cases, have exacerbated the economic impact.

“These two characteristics, combined with a contraction in trade and financial turmoil caused by the weakening of the world economy, contributed to the historic collapse of activity,” explained Alejandro Werner, director of the IMF for the Americas, in the blog that accompanies the release of the report.

The IMF expects a 3.6% expansion in 2021, with “uneven recovery” and “deep scars”.

The spread of the virus persists along with uncertainty about its evolution, with the result that economic projections for the region are skewed downwards.

“Most countries will not return to pre-pandemic GDP until 2023, and per capita income until 2025, later than any other region,” said Werner, who wrote the blog with Samuel Pienknagura and Jorge Roldós.

The report points out – as the IMF has already pointed out – that this “means that Latin America and the Caribbean face the possibility of yet another lost decade, like that of the 1980s”.

In April, Werner had already warned about the possibility that between 2015 and 2025 the region would not register economic growth, as it happened 40 years ago due to the foreign debt crisis.

“Uncertain panorama”

The IMF pointed out that the countries of Latin America and the Caribbean announced fiscal support equivalent to 8% of regional GDP to mitigate the impact of the pandemic.

“These exceptional measures are crucial to support economic activity in order to avoid even stronger economic slowdowns and more severe social repercussions,” said the report.

In Brazil, without this emergency plan, the poverty rate would have increased from approximately 6.7% to 14.6%, he noted.

In addition to fiscal measures, the IMF considered the laws passed in Chile and Peru to withdraw pension funds in advance to be positive, and praised the cut in monetary policy rates across the region.

Now, the priority is to stop the spread of the virus and consolidate the economic recovery, said the Fund, asking to avoid withdrawing aid packages, but without losing sight of the need for future structural reforms that include access to health and education. and preserve public investment.

“A weaker-than-expected recovery and a more persistent pandemic will impose more difficult decisions on governments. Scars and lower potential GDP growth increase short-term political challenges, ”warned the text.

The conclusion is that, while structural reforms may lay the foundations for more sustainable and inclusive growth, “the pandemic’s legacies are already an uncertain vision for the region”.

Source: G1

The International Monetary Fund warned on Thursday (22) that the pandemic will have a strong impact on employment in Latin America, with a significant increase in poverty and a return to real income per capita prior to covid-19 only in 2025.

“The covid-19 shock is expected to have a broad impact on employment and eliminate some of the social progress made by the region by 2015,” said the IMF when publishing its latest economic prospects for Latin America and the Caribbean.

“Current estimates indicate lasting income losses and poverty is expected to increase substantially in 2020”.

The IMF estimates a contraction of the regional Gross Domestic Product (GDP) of 8.1% in 2020. But, unlike previous recessions, employment fell more strongly than GDP in the second quarter of 2020: more than 30 million people were left without work in Brazil, Mexico, Chile, Colombia, Mexico and Peru.

Job losses were most marked among women, especially in Brazil, Colombia and Peru, as well as among young people and low-skilled workers.

The incidence of the pandemic in informal employment was also severe, which in other recessions has acted as a buffer.

In countries highly dependent on tourism, such as the Caribbean, the pandemic was like a “cardiac arrest”, said the IMF.

Another lost decade?

The structural aspects of the Latin American labor market, where 45% of jobs are located in sectors with high social contact and teleworking is possible in only one in five cases, have exacerbated the economic impact.

“These two characteristics, combined with a contraction in trade and financial turmoil caused by the weakening of the world economy, contributed to the historic collapse of activity,” explained Alejandro Werner, director of the IMF for the Americas, in the blog that accompanies the release of the report.

The IMF expects a 3.6% expansion in 2021, with “uneven recovery” and “deep scars”.

The spread of the virus persists along with uncertainty about its evolution, with the result that economic projections for the region are skewed downwards.

“Most countries will not return to pre-pandemic GDP until 2023, and per capita income until 2025, later than any other region,” said Werner, who wrote the blog with Samuel Pienknagura and Jorge Roldós.

The report points out – as the IMF has already pointed out – that this “means that Latin America and the Caribbean face the possibility of yet another lost decade, like that of the 1980s”.

In April, Werner had already warned about the possibility that between 2015 and 2025 the region would not register economic growth, as it happened 40 years ago due to the foreign debt crisis.

“Uncertain panorama”

The IMF pointed out that the countries of Latin America and the Caribbean announced fiscal support equivalent to 8% of regional GDP to mitigate the impact of the pandemic.

“These exceptional measures are crucial to support economic activity in order to avoid even stronger economic slowdowns and more severe social repercussions,” said the report.

In Brazil, without this emergency plan, the poverty rate would have increased from approximately 6.7% to 14.6%, he noted.

In addition to fiscal measures, the IMF considered the laws passed in Chile and Peru to withdraw pension funds in advance to be positive, and praised the cut in monetary policy rates across the region.

Now, the priority is to stop the spread of the virus and consolidate the economic recovery, said the Fund, asking to avoid withdrawing aid packages, but without losing sight of the need for future structural reforms that include access to health and education. and preserve public investment.

“A weaker-than-expected recovery and a more persistent pandemic will impose more difficult decisions on governments. Scars and lower potential GDP growth increase short-term political challenges, ”warned the text.

The conclusion is that, while structural reforms may lay the foundations for more sustainable and inclusive growth, “the pandemic’s legacies are already an uncertain vision for the region”.

Source: G1

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