The countries of Latin America and the Caribbean face a “significant risk” of social unrest due to the impact of the pandemic on their already stagnant economies, and must ensure growth that takes into account inequities, IMF experts warned Monday.
“With an intense electoral calendar looming, social unrest remains a major risk and inequality will need to be addressedEconomists from the International Monetary Fund (IMF) warned. Costa Rica, Colombia and Brazil will have elections this year.
The search for policies to reactivate economic expansion with an emphasis on social inclusion should go coupled with the fight against inflationThey also said, stressing that 2021 was marked by the strong increase in prices in the region.
In a post on the IMF blog, they indicated that the covid-19 pandemic declared in 2020 hit Latin America and the Caribbean “after a year of widespread social unrest, accumulated during the years of economic stagnation that followed the end of the commodity boom“, recorded for a decade until 2013.
The article, signed by Ilan Goldfajn, who took over this month as director of the IMF’s Department for the Americas, analyzes the slowdown in growth in the region predicted last week by the IMF, to 2.4% in 2022 (0.6 percentage points less than forecast last October).
Goldfajn, the deputy director of the Department of the Americas, Jorge Roldós, and the deputy head of regional studies, Anna Ivanova, pointed out that the strong recovery of Latin America and the Caribbean in 2021, of 6.8% after the dramatic contraction of 7% in 2020 , is losing momentum and it is necessary to make reforms.
“The countries of the region must face simultaneously three great challenges: ensure the sustainability of public finances; increase potential growth; and do it in a way that promotes social cohesion and addresses social inequalities,” they said.
Addressing these challenges, which have been dragging on even before the health emergency, also involves the challenge of lowering inflation.
In 2021, prices increased by 8.3% in some of the large regional economies (Brazil, Chile, Colombia, Mexico and Peru), “the jump largest in 15 years and higher than other emerging markets“, the experts emphasized.
They specified that the main central banks reacted “quickly and decisively” to the strong increase in consumer prices, tightening monetary policy.
But in the face of high short-term inflation expectations, it will be necessary to constant vigilance and possible additional rises in interest rates, all “accompanied by clear and transparent communication,” they said.
AFP
