The World Bank projects the recession in Latin America and the Caribbean will be the worst downturn since reliable data began in 1901, setting back progress on fighting inequality and poverty.
The development institution expects a gross domestic product contraction of more than 7% for 2020, making it worse than any crisis of the past century, including the Great Depression, the 1980s debt crisis and the global financial of 2008-2009, President David Malpass said.
The drop in commodity exports based on a plunge in demand in advanced economies, coupled with the collapse of tourism, is hammering the region, Malpass said in a webcast hosted by the Council of the Americas on Wednesday.
“It hits the poor and vulnerable the hardest through illnesses, job and income losses, food supply disruptions, school closures and lower remittance flows,” he said. “The poverty rate, which had been falling since the early 2000s, will go up significantly as tens of millions of people lose their jobs,” he said.
Political systems were fragile before the pandemic and will be severely challenged by the current crisis, Malpass said. The World Bank has been helping more than 100 countries worldwide to deal with the health crisis and working with the International Monetary Fund and Inter-American Development Bank to provide support to Latin America, he said.
Economies in the region are going to look different after the pandemic, and nations need legal systems that allow restructuring when there are business failures so that capital can flow from from old industries to new ones, Malpass said. Countries also should look at the current period of low oil and natural gas prices as an opportunity to get rid of expensive subsidy systems, he said.