A recession in Latin America and the Caribbean (LAC) that rivals the Great Depression of 1930, will follow the COVID-19 pandemic, according to the United Nations’ Economic Commission for Latin America and the Caribbean (ECLAC), with The Bahamas’ gross domestic product (GDP) estimated to decline by 6.8 percent.
The commission has projected, in a special COVID-19 report titled “Quantifying the impact of COVID-19 with a view to reactivation”, that the entire Caribbean’s GDP will decline by 1.5 percent, brought on by decreased demand for tourism services.
As for the entire LAC region, ECLAC has projected a GDP contraction of 5.3 percent, which is more than the five percent drop during the Great Depression.
This is the second study in less than a month that ECLAC has completed on the regional impact of COVID-19 on international trade, commodity prices, tourism, employment and remittances.
With regional unemployment projected to jump 11.5 percent and poverty to increase by 4.5 percent, the commission suggested specific monetary and fiscal measures to help countries avoid the collapse of their economic systems.
“Policy makers must broaden their toolkits and increase co-ordination between governments and central banks to finance packages through the purchase of public securities or the use of external assets to finance emergency spending increases,” the report suggests.
“In addition, adapt macroprudential instruments to ease exchange rate volatility and excessive currency depreciation to avoid destabilizing capital movements.”
The ECLAC report notes that the global economy will become more regionalized because of the COVID-19 pandemic and as a result, more regional integration is required in the post-COVID-19 world.
“The region’s future should be shaped on the new economic geography to reduce dependence on imported manufactures and develop regional value chains,” the report noted.
“There is a need for industrial policies that allow the region to strengthen production capabilities and create new strategic sectors. In order to have an impact on the new global economy, the region must advance towards greater integration in production, trade and technology.”
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