Pointing to risks associated with slower-than-expected economic growth in 2023, the Inter-American Development Bank (IDB) said policy makers for heavily tourism dependent economies in the region need to account for the possibility of a slowdown in travel demand. The IDB in its Latin American and Caribbean Macroeconomic Report 2023 projected regional economic growth of just one percent
Joshua Aizenman, Hiro Ito
Central banks throughout the world implemented an array of monetary policies to fight the COVID-19 crisis. In contrast to some advanced economies, in response to negative shocks in the past, emerging economy central banks tended to increase policy interest rates as sharp exchange rate depreciations and pass-through pushed inflation higher.
1 During the COVID crisis, however, central banks in many emerging economies reduced policy interest rates to close to an effective lower-bound (see Figure 1). They also provided substantial liquidity, especially to banks and to governments (Aguilar and Cantú 2020, Nuguer and Powell 2020). Central banks and governments worked together with the common objective of supporting economies.
Andrew Powell, José Juan Ruiz Gómez
There appears to be no real trade-off between growth rates in 2020 and deaths due to Covid-19 in the same year. Countries that suffered more deaths tended to have lower growth and vice versa (see Figure 1). Unfortunately, many countries in Latin America and the Caribbean are located in the wrong sector of the graph. The region has only 8% of the global population but accounts for more than 25% of deaths and lost an estimated 7.0% of GDP, the largest loss in a single year since the struggle for independence 200 years ago.
1
Source: Cavallo and Powell (2021)
Tourism-dependent countries such as the Bahamas, Barbados, and Jamaica suffered deeper falls in GDP than might have been anticipated given the level of deaths (they would be located above a naïve regression line), while Brazil and Chile suffered more deaths than could have been expected given the depth of the recessions. The crisis is threatening to leave the region with higher poverty lev