World Bank: ‘Latin American and Caribbean must seize opportunity to grow and recover’

By Aaron Humes: The World Bank in a recent report predicts steadier growth for Latin American and Caribbean economies of 2.3 percent this year and a further 2.2 in 2023, with most countries reversing the GDP losses from the pandemic crisis.

However, these modest projections place regional performance among the lowest in the world at a time when the region faces important uncertainties as new variants of the virus may appear, inflation pressures mount and the war in Europe threatens the world recovery. In fact, the regional growth projection has been revised downward by 0.4 percent after the Russian invasion of Ukraine.

The Bank says, “Economies in Latin America and the Caribbean (LAC) are on track to recover from the COVID-19 crisis, but the scars of the pandemic remain and the need for a more dynamic, inclusive, and sustainable growth is ever more urgent.” It notes that vaccination is widespread across the region, firms are again hiring, and schools are reopening, but poverty remains above the pre-COVID level and learning losses could lead to a 10 percent decrease in future earnings for millions of school-age children. To avoid returning to the low growth rates of the 2010s, countries in the region need to engage in long-delayed structural reforms and seize the opportunities offered by a greening world economy.

According to the report, growth-advancing reforms in infrastructure, education, and innovation remain paramount, and key investments should be financed through more efficient spending and revenue mobilization. But these much-needed reforms should respond to major forces shaping the global economy, including climate change.

Over the last two decades, the report stresses, countries in Latin America and the Caribbean lost the equivalent of 1.7 percent of a year’s GDP due to climate-related disasters and up to 5.8 million people could be pushed into extreme poverty in the region by 2030. Agriculture is likely to be hit hard, with crop yields decreasing in virtually all countries, and energy generation stability will be undermined by changes in the hydrological cycle.

Suggested policies for governments include reforming fossil fuel subsidies and establishing carbon taxes and emission trading schemes; Credible verification mechanisms that facilitate access to green premiums. This allows for exports of carbon credits/offsets, and draws on the green finance market; improved systems for identifying and adopting technologies to mitigate the region’s impact on climate, and to adapt to it, while leveraging its natural advantages for growth, for example, climate-smart agriculture; policy commitments, credible long-term plans, complementary investments, and de-risking mechanisms, which reduce uncertainty and speed up the adoption of technologies that will promote growth while adapting to and mitigating climate change.

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