Regional Economic Outlook for Western Hemisphere, October 2021
Regional Economic Outlook, October 2021
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- Published: October 21, 2021
Overview / Outlook for Latin America and the Caribbean (LAC)
- An economic recovery is underway in Latin America and the Caribbean (LAC) but the pandemic still casts shadows on much of the region.
- The recovery was robust in the first quarter of 2021 but lost momentum in some countries in the second quarter, reflecting the rebound in COVID-19 cases.
- Real GDP is projected to grow by 6.3 percent in 2021, followed by a more moderate growth of 3 percent in 2022, but would not catch up with pre-pandemic trends in the medium term as persistent weakness in labor markets raises risks of scarring.
- Broadly favorable external conditions, high commodity prices, and pent-up demand support short-term growth, while monetary and fiscal policy reversals work in the other direction.
- Risks to the outlook are tilted downward.
Key risks to the outlook
- Emergence of more transmissible and deadlier COVID-19 variants.
- Tightening of global financial conditions.
- Sovereign debt rollover risks.
- Social unrest as a year with heavy election schedule looms.
Policy recommendations
- Fiscal policy:
- Allocate sufficient resources for health spending, including vaccination.
- Continue to support households and firms in a more targeted fashion while the pandemic persists.
- Back support measures with credible assurances of medium-term debt sustainability to maintain access to finance.
- Monetary policy:
- Has started to address inflationary pressures but should continue to support economic activity insofar as the dynamics of inflation expectations permit.
- Financial policy:
- Shift from blanket support to targeted support of viable firms, to ensure that necessary labor and capital reallocations are not hindered.
- Supply-side policies:
- Foster inclusive growth, including through progressive and growth-friendly tax reforms.
- Intensify measures for climate change adaptation and mitigation.
Analytical chapters highlighted on the page
- Tax Policy for Inclusive Growth in Latin America and the Caribbean:
- Fiscal challenges in Latin America and the Caribbean (LAC) have been exacerbated by the COVID-19 pandemic, calling for a careful assessment of how to mobilize revenue in an inclusive and growth-friendly manner.
- The chapter provides an overview of taxation in LAC before the pandemic and compares it to OECD countries.
- Climate Change Challenges in Latin America and the Caribbean:
- Climate change presents multiple challenges for a region as diverse as Latin America and the Caribbean (LAC).
- Some LAC countries face challenges related to containing and reducing greenhouse gas (GHG) emissions (mitigation), while others have an urgent need to build resilience to natural disasters (adaptation).
- In the LAC region as a whole, mitigation and adaptation policies will require significant upfront financing, including importantly support from the international community and the private sector.
Regional Economic Outlook for Latin America and the Caribbean, October 2021
Content in this bundle
- Appendix Tables
- Chapter 2
- Chapter 3
- Dataset overview
- Outlook for Latin America and the Caribbean
- Regional Economic Outlook: Western Hemisphere — October 2021 (chapter excerpts)