Economy

World Bank forecasts a 3.7% growth for Latin America's GDP in 2021

New projections by the organization indicate more countries in 'deep debt distress' this year

World Bank President David Malpass
World Bank President David Malpass attends the "1+6" Roundtable meeting at the Diaoyutai state guesthouse in Beijing, China November 21, 2019. Photo: REUTERS/Florence Lo/ File Photo
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  • David Malpass, the World Bank Group’s President, said the Bank and the International Monetary Fund (IMF) were currently assessing countries’ debt sustainability facing problems;
  • The novel coronavirus, which has killed more than 1.85 million worldwide, has hit the emerging markets and developing countries particularly hard, exacerbating heavy debt burdens already faced by many countries before the crisis.

Several countries are already in deep debt distress. More will join their ranks this year, given the severity of the global recession triggered by the COVID-19 pandemicWorld Bank Group’s President David Malpass said this Tuesday.

“For some countries, it’s a red alert,” he said during a teleconference. “We need to find ways to adjust the debt burden so that the burden of debt on people in poorer countries can be reduced dramatically.” For Latin America and the Caribbean, the organization’s new projections point out a 3.7% GDP growth this year – a weak rebound after an estimated 6.9% fall for 2020.

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“The volume of goods exports from the region dropped 8% year-on-year in the first three quarters of last year, while tourism arrivals halted, with Caribbean economies most exposed. Remittance inflows to some countries in the region grew more slowly than in previous years,” describes the report.

“In a negative scenario in which the distribution of vaccines is delayed,” warned the Washington-based entity, “growth could be even lower, of 1.9%.” Also, in a downside scenario, in which infections continue to rise and the rollout of a vaccine is delayed, global expansion could be limited to 1.6% in 2021.

  • In Brazil, improving consumer confidence and benign credit conditions are expected to support a rebound in private consumption and investment, pushing 2021 growth to 3%. The services sector will recover more slowly than the industrial sector due to lingering risk aversion among consumers;
  • In Mexico, recovery is based mainly on a recovery in exports as the U.S. economy picks up and trade uncertainty fades after the United States-Mexico-Canada Agreement entered into force in mid-2020. The country is likely to grow 4.9% this year;
  • In its turn, Argentina’s economy will grow by 4.9% in 2021, underpinned by domestic demand, says the World Bank, as a loosening of pandemic mitigation measures and fading uncertainty around debt restructuring support private consumption and investment.
  • In Central America, forecasts the organization, growth is expected to recover to 3.6% this year, supported by higher remittance inflows and more robust export demand and reconstruction after two hurricanes.
  • And the Caribbean is likely to rebound to 4.5%, “boosted by a partial recovery of tourism”.

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Debt burdens

Malpass said the Bank and the International Monetary Fund (IMF) were currently assessing countries’ debt sustainability facing problems. The novel coronavirus, which has killed more than 1.85 million worldwide, has hit the emerging markets and developing countries particularly hard, exacerbating heavy debt burdens already faced by many countries before the crisis.

China, the biggest creditor by far with 65% of official bilateral debts, had to focus on its response, given sharp declines in countries’ ability to service those debts, he said.

Malpass said a common framework for debt treatments adopted by China and other Group of 20 major economies in November, and extension of a freeze in official bilateral debt payments through June were good steps, but more work would be needed.

He said he had already spoken with Italian officials and they were committed to continuing efforts to help heavily indebted countries during Italy’s year at the helm of the G20.

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