The Cost of Staying Healthy
Executive summary
Executive summary
L
atin America and the Caribbean is the region hardest hit by the Covid-19 pandemic. The number of deaths per million people is as high as in advanced economies, if not more, but the resources available to counter the shock are much more constrained. The resulting eco-
nomic crisis arrives on the back of several years of disappointing economic growth and limited progress on social indicators, and right after a wave of social unrest. The impact of Covid-19 has been felt through multiple channels, including lower foreign demand, increased economic uncertainty, a collapse of tourism flows and, especially, the consequences of months under lockdown to trying to contain the spread of the disease. On the positive side, international developments have been less unfavorable than could have been anticipated six months ago. Global trade in goods is returning to pre-crisis levels and commodity prices have held relatively well. After a sharp initial decline, remittances are generally higher than a year earlier, and few countries have lost access to international financial markets. The stimulus packages set up by several governments in the region were remarkably robust, despite the fiscal constraints, and much of the additional resources went to social transfers. And yet, the economic and social damage is immense. Unemployment rates have increased across Latin America and the Caribbean, sometimes substantially. A series of telephone surveys conducted by the World Bank in 13 countries in the region shows that the share of households that suffered a decline in income is even higher than the share experiencing job losses. A similar survey exercise by the World Bank focusing on firms and covering five countries in the region, reveals that a large share of the respondents has fallen in payment arrears or anticipate doing so soon. The findings of these rapid response assessments, summarized in this report, suggest that the impact of the crisis is not only severe but also potentially long-lasting. One reason to temper the most pessimistic forecasts is the remarkably large scale of the stimulus packages adopted by several governments in Latin America and the Caribbean. Five of the ten social transfer programs with the broadest population coverage in the developing world are in the region. A first background study for this report shows that the fiscal multiplier of social transfers is much larger in the region than in advanced economies. And it is consistently large for the countries with more sizeable and better targeted social transfers. The strong response to the Covid-19 crisis could thus be remembered as one of the first examples of successful countercyclical fiscal policy across large swaths of the region.
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