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Latin American economy to shrink 9.1% in 2020, says UN agency

Xinhua | Updated: 2020-07-16 14:38
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SANTIAGO - Latin America's economy will shrink by 9.1 percent in 2020 due to the COVID-19 pandemic, the Economic Commission for Latin America and the Caribbean (ECLAC) said in a report on Wednesday.

ECLAC downgraded its growth projections for Latin American and Caribbean countries, saying external and domestic shocks have been stronger than originally foreseen in April.

Economic activity worldwide "is falling by more than what was foreseen several months ago as a result of the crisis stemming from the coronavirus disease (COVID-19), and this increases negative external effects on Latin America and the Caribbean through trade channels, the terms of trade, tourism and remittances," ECLAC said in a special report on the pandemic.

The region is currently at the epicenter of the pandemic, and while some governments have begun to lift measures, others have had to keep them in place or even redouble them due to the persistent daily uptick in cases, ECLAC said.

A breakdown by subregion shows gross domestic product (GDP) in 2020 is expected to drop 9.4 percent in South America, 8.4 percent in Central America and Mexico, and 7.9 percent in the Caribbean.

"The fall in economic activity is of such a magnitude that GDP per capita in Latin America and the Caribbean will end 2020 at a level similar to what was seen in 2010, meaning that there will be a setback of 10 years in income levels per inhabitant," the report warned.

"A greater increase in unemployment is also foreseen now, which in turn will produce a significant deterioration in poverty and inequality levels," ECLAC Executive Secretary Alicia Barcena said when presenting the report.

The regional unemployment rate is projected to be around 13.5 percent by the end of 2020, 2 percentage points higher than projected in April and 5.4 percentage points higher than 2019's figure.

"With this new estimate, the ranks of the unemployed are seen swelling to 44.1 million people in total, which represents an increase of nearly 18 million people versus the level in 2019," said ECLAC, one of the five regional commissions of the United Nations.

"These figures are significantly higher than those observed during the global financial crisis, when the unemployment rate rose from 6.7 percent in 2008 to 7.3 percent in 2009," said ECLAC.

As a result, the number of people living in poverty will rise by 45.4 million in 2020, which means that the total number of people in that situation will go from 185.5 million in 2019 to 230.9 million people in 2020, or 37.3 percent of Latin America's population.

Within this group, the number of people experiencing extreme poverty is seen rising by 28.5 million, going up from 67.7 million people in 2019 to 96.2 million in 2020, a figure equivalent to 15.5 percent of the total population.

ECLAC called on regional governments to take added measures to mitigate the impact of the pandemic.

"Although the region's countries have announced very important measures, to the extent that the confinement is prolonged, additional efforts are needed to meet basic needs and sustain household consumption," said the agency based in Santiago, Chile.

ECLAC has recommended the implementation of an emergency basic income and other steps.

"National efforts must be supported by international cooperation to expand policy space through increased financing under favorable conditions and debt relief. Likewise, making progress on equality is crucial for effectively controlling the pandemic and for a sustainable economic recovery in Latin America and the Caribbean," Barcena said.

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