6 Latin American economies that will fall the most in 2020
As a result of the impact of the corona virus epidemic, this year it will record the largest contraction in the world economy since 1946.
The situation was even worse for Latin America.
According to the Latin American and Caribbean Economic Commission (ECLIC) last week, the region has experienced the biggest decline in gross domestic product (GDP) for more than a century.
“In this context, Latin America and the Caribbean make up the most vulnerable part of the developing world when compared to different health, economic, social and inequality indicators,” one agency said in a statement.
Overall, Latin American countries already had low economic growth – an average of 0.3% between 2014 and 2019, before the outbreak of the Govt-19 epidemic.
In this sense, ECLAC explained that “the need to implement control policies for epidemics, negative external shocks, and the closure of physical distance and production activities have been included in this low economic growth, which has exacerbated the health emergency and the economic, social and productive crisis that has plagued the region for the past 120 years” .
Although the reduction in global economic activity has affected the entire region, not all countries have been affected equally, although they have recorded a contraction of GDP.
Check out below the 6 Latin American economies that fell the most in 2020 and the specific factors that affected these bad results.
Venezuela tops the list of Latin American economies, with -30% at the end of this year, according to ECLAC estimates.
However, this major setback is not limited to corona virus infection. This is in line with other issues that have led the Venezuelan economy to record its 7th consecutive year of economic contraction in 2020.
“Since 2014, the dynamics of Venezuela’s oil and non – oil sectors have been characterized by a prolonged and severe contraction of the GDP. The situation worsened in 2020 due to the effects of the corona virus infection, severe fuel shortages and hardening. US sanctions on the Venezuelan public sector.” The ECLAC published a report on the Venezuelan economy as a supplement to its report.
Torino Economics, a division of New York-based Torino Capital LLC Investment Bank, estimates that Venezuela’s GDP decline in 2020 was lower than the ECLAC’s estimate: 24.7%.
ECLAC expects a recovery in Latin American economies by 2021, leading to an average regional growth of 3.7%, which the company estimates will be the only underdeveloped country in the Venezuelan region. Recorded a recession at a rate of 7% decline in its GDP.
Unlike Venezuela, Peru began 2020 with a history of jealousy: an uninterrupted decade of economic growth.
Despite this, ECLAC says it will close its GDP shrink by 12.9% this year, making it “one of the most difficult (countries) in the world” due to the corona virus.
“The fall in GDP of trading partners has severely affected external demand, and domestic demand has fallen due to lower household spending and disruption to investment projects,” ECLAC said in a statement released as a supplement to the Peruvian economy.
According to the organization, another factor contributing to the decline in Peruvian GDP was the shock of a “strong shutdown” caused by months of harsh imprisonment.
Torino Economics points out that, in the midst of the epidemic, Peru undertook one of the largest financial stimulus programs in all of Latin America, but “its effectiveness was curtailed due to the stricter control measures implemented and the sudden interruption in investments and exports, coupled with the fall in the price of raw materials in international markets.”
Between 2010 and 2019, Panama recorded 6.2% year-on-year economic growth.
However, by 2020, the ECLAC estimated Latin America as the third country with the largest contraction in GDP: 11%.
“This decline is mainly due to measures taken to combat the Govt-19 epidemic in the country and around the world,” ECLIC said.
Between January and August 2020, the value of the country’s exports fell by 23.7% compared to the same period in 2019, with exports declining mainly from the colon free zone, which represents more than 90% of exports. Products from Panama.
Revenue from tourism and financial services such as construction, hotels and casinos, which are important sectors of the Panamanian economy, have also been affected.
According to the ECLAC, Panama is expected to grow by 5.5% by 2021, driven by a gradual resumption of economic activity.
4) Argentina: -10.5%
Argentina, like Venezuela, is one of the region’s economies that experienced economic contraction before the epidemic.
The country will record 2020 as the 3rd consecutive year of shrinking GDP. The ECLAC estimates this fall to be 10.5%, much higher than the 2.1% affected in 2019.
“This performance is due to the impact of the corona virus infection crisis (COVID-19), which has adversely affected private consumption, investment and exports,” the organization said.
“Economic activity contracted by 12.6% year-on-year in the first half of 2020, on the back of a fall in investment (28.7% year-on-year), private consumption (14.5%), exports (8, 7%) and general consumption (5.5%), the Govt-19 epidemic. , Which brought about a high level of uncertainty, from which restrictions on circulation were established, with a negative impact on both supply and demand, ”he told ECLAC.
Torino Economics has linked Argentina’s economic contraction with “the decline of industries such as hotel and tourism, other social service activities, construction, transportation, communications and fishing. The virus is spreading as activities cease in March.”
In addition, the impact of the epidemic has exacerbated the structural economic inequalities that Argentina is experiencing, especially in the financial, monetary and foreign exchange sectors.
Despite this, the ECLAC estimates that by 2021, the country will record 4.9% growth due to the evolution of the epidemic and the availability of vaccines.
5) Mexico: -9%
Mexico’s economy contracted by 0.1% in 2019.
However, its decline this year will be very high, at 9%, the largest contraction of GDP since 1932, according to ECLAC.
Among the factors affecting the contraction, the company cited a 42.9% drop in oil revenues between January and October.
During the same period, non-oil exports to the United States fell by 11.2% and to the rest of the world by 12%.
The ECLAC also points to an 18.3% drop in foreign direct investment (FDI) inflows, not only for the epidemic, but also for the “uncertainty created by recent public policy decisions” that have directly affected oil production projects. Energy, Airports and Beverages.
Regarding the prospects for recovery by 2021, ECLAC estimates that Mexican GDP will grow by 3.8% as a gradual recovery in economic activity.
However, the Torino economy is very conservative and expects 2% growth.
In the case of Ecuador, ECLAC felt that the corona virus had exacerbated the previous negative trend.
“The impact of the current crisis caused by the epidemic has deepened the already critical economic situation that has arisen since the third quarter of 2019,” the company said in a document attached to its report on its region.
ECLAC estimates that Ecuador’s GDP will fall by 9% this year.
He further added that the outcome of the epidemic was “a sharp drop in all components of the overall demand”.
For example, he pointed out that in the second quarter of this year, consumption by households (12%) and government (10.5%) decreased compared to the same period in 2019.
Oil exports were recorded, between January and September 2020, 44% lower than the previous year.
The Torino economy considers this “historic fall” of the Ecuadorian economy to be the result of both a fall in real investment and a reduction in consumption and control measures.
Looking at 2021, ECLAC estimates that Ecuador’s GDP will increase by 1%, subject to “basic recovery in domestic demand”.
“It depends on the impact of various programs implemented by the government to combat the epidemic and its control, as well as the resumption of economic activity and mitigation of social repercussions,” ECLAC said.
However, the organization pointed out that there are a number of uncertainties regarding this situation, mainly related to external conditions such as the evolution of the epidemic and further fall in oil prices.
Although Latin American economies will not fall much by 2020, ECLAC says Brazil will show a 5.3% contraction in GDP this year.
In 2021, the forecast for 3.2% growth.
“By 2020, the corona virus epidemic (COVID-19) will negatively affect the evolution of the Brazilian economy and the large number of lives,” the organization said.
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