Regional Economic Outlook

Regional Economic Outlook for Western Hemisphere - October 2021 hero image

Outlook for Latin America and the Caribbean

A Long and Winding Road to Recovery

PHOTO: ISTOCK / William Rodrigues dos Santos

Regional Economic Outlook for Latin America and the Caribbean, October 2021

October 2021 Regional Economic Outlook for Western Hemisphere - Cover

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. Main downside risks are the emergence of more transmissible and deadlier COVID-19 variants, tightening of global financial conditions, sovereign debt rollover risks, and social unrest as a year with heavy election schedule looms.

Fiscal policy should allocate sufficient resources for health spending, including vaccination, and continue to support households and firms in a more targeted fashion while the pandemic persists, backed by 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 should shift from blanket support to targeted support of viable firms, to ensure that necessary labor and capital reallocations are not hindered. Supply-side policies should foster inclusive growth, including through progressive and growth-friendly tax reforms and measures to intensify climate change adaptation and mitigation.

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Regional Economic Outlook for Latin America and the Caribbean - Digital Card

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  • Analytical Chapters

    Tax Policy for Inclusive Growth in Latin America and the Caribbean

    Fiscal challenges in Latin American 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. This chapter provides an overview of taxation in LAC before the pandemic and compares it to OECD countries.

    Perspectivas económicas regionales para América Latina y el Caribe, octubre de 2021
    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.