After a negative year-end of -6.7% of gross domestic product (GDP) in 2020, the Dominican Republic’s economy will reach growth of 4.8% in 2021 and 4.5% in 2022, well above the forecast growth for the region by 3.7% for this year and from many of the Latin American countries.
The information is included in the regional chapter of the World Bank’s World Economic Outlook report, published by the multilateral financial institution.
The Latin American and Caribbean regions have been hit hard by the Covid-19 pandemicboth from a health and an economic perspective, the report states.
It indicates that five of the 10 emerging markets and emerging economies with the highest per capita death rate from this disease are in the region.
“It is estimated that the regional economy contracted by 6.9% last year because households and businesses exhibited risk-averse behavior and pandemic control measures limited formal sector activity, ”he says.
Formal employment, hours worked and earnings have decreased significantly. Women and young people, who have high participation rates in the sectors most disrupted by the pandemic, such as hotels, restaurants and personal services, have been disproportionately affected by job losses, as have low-income households.
Price increases
Falling incomes have contributed to food insecurity, exacerbated in some countries by food price inflation. The volume of goods exported from the region fell by 8% year-on-year in the first three quarters of last year, while the influx of tourists stopped.. The Caribbean economies had the worst consequences. In some countries in the region, remittance flows increased more slowly than in the past.
Regional perspective
Regional economic activity is expected to grow 3.7% in 2021 as pandemic mitigation initiatives become more agile, vaccines are distributed, prices of key commodities stabilize and external conditions improve. However, the recovery will be very weak and will come after a decade of slow growth. In a negative scenario, in which the distribution of vaccines is slowed, with secondary economic effects, growth could be even lower at 1.9%.
In Brazil, rising consumer confidence and favorable credit conditions are expected to support a recovery in private consumption and investment, pushing growth to 3% in 2021.
The private sector is recovering more slowly than the industrial sector due to the persistence of a degree of risk aversion among consumers. The forecast of a recovery in Mexico is mainly based on an improvement in exports as the US economy recovers and trade uncertainty disappears after the entry into force of the agreement between the United States, Mexico and Canada in mid-2020 that growth will recover this year and 3.7%.
Argentina’s economy is projected to grow by 4.9% in 2021 as the easing of pandemic measures and the reduction of uncertainty surrounding debt restructuring will support private consumption and investment. In Colombia, growth is expected to increase to 4.9%, supported by domestic demand.
In Central America, growth is expected to pick up at 3.6% this year, supported by higher remittance inflows and stronger export demand, and rebuilding after two hurricanes.
In the Caribbean, growth is expected to recover to 4.5%, driven by a partial recovery in tourism.
Risks: The outlook involves unfavorable risks
The pace of activity could slow as a result of various factors, including the inability to contain the pandemic, problems related to debt and external financing, the resurgence of social tensions, economic damage caused by the pandemic of which the severity was not foreseen, and disturbances related to climate change and natural disasters.
Deteriorating investor confidence poses a serious risk to the economic outlook. Although fiscal stimulus measures were needed to absorb the blow of the pandemic, fiscal leeway has been exploited to a large extent and public debt has risen sharply. Creditworthiness has diminished across the region. The combination of deep-seated inequality of opportunity, a negative image of the effectiveness of governments and growing poverty could rekindle social conflict.
World Bank Group Response to Covid-19
The World Bank Group, an important source of funding and knowledge for developing countries, is taking swift and far-reaching measures to help those countries strengthen their response to the pandemic. It supports public health initiatives, is committed to ensuring the supply of essential supplies and equipment, and helps the private sector to continue its activities and maintain employment.
The organism to provide up to $ 160 billion over a 15-month period ending June 2021 to help more than 100 countries protect the poor and vulnerable, support businesses and drive economic recovery. This amount includes $ 50,000 million corresponding to new funds from the International Development Association (IDA) in the form of grants and loans on very favorable terms and $ 12,000 million intended to help developing countries finance the purchase and distribution of vaccines against the Covid-19.