Latin America entered the pandemic as one of the most unequal regions in the world. And like much of the rest of the world, it will come out of the pandemic poorer and more unequal. Early estimates suggest that 19 million more people in the region have fallen into poverty and inequality increased by 5 percent compared to pre-crisis levels. Large scale public support in many countries prevented an even worse outcome, but this pushed public debt levels from 68 to 77 percent of GDP. This will likely limit governments’ ability to tackle longer-term legacies of the pandemic once the recovery gains traction.

And yet, the outlook for poverty and inequality in the region could be brighter than it appears for two reasons: (i) resurgent commodity prices; and (ii) the opportunity provided by the pandemic for a broader political and social consensus on necessary reforms.

Making the most of resurgent commodity prices

Commodity terms of trade—the ratio between...

Latin America entered the pandemic as one of the most unequal regions in the world. And like much of the rest of the world, it will come out of the pandemic poorer and more unequal. Early estimates suggest that 19 million more people in the region have fallen into poverty and inequality increased by 5 percent compared to pre-crisis levels. Large scale public support in many countries prevented an even worse outcome, but this pushed public debt levels from 68 to 77 percent of GDP. This will likely limit governments’ ability to tackle longer-term legacies of the pandemic once the recovery gains traction.

And yet, the outlook for poverty and inequality in the region could be brighter than it appears for two reasons: (i) resurgent commodity prices; and (ii) the opportunity provided by the pandemic for a broader political and social consensus on necessary reforms.

Making the most of resurgent commodity prices

Commodity terms of trade—the ratio between...

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Emerging and developing economies are viewing rising interest rates with trepidation. Most of them are facing a slower economic recovery than advanced economies because of longer waits for vaccines and limited space for their own fiscal stimulus. Now, capital inflows to emerging markets have shown signs of drying up. The fear is of a repeat of the “taper tantrum” episode of 2013, when indications of an earlier-than-expected tapering of US bond purchases caused a rush of capital outflows from emerging markets.

Are these fears justified? Our research in the latest World Economic Outlook finds that for emerging markets, what matters is the reason for the rise in US interest rates.

Cause and effect

When the reason is good news about US jobs or COVID-19 vaccines, most emerging markets tend to experience stronger portfolio inflows and lower spreads on US dollar-denominated debt. Good economic news in advanced economies could lead to export growth for emerging...

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The Bahamas, Sri Lanka, and Uganda fight the pandemic’s disruption with innovation

Never let a serious crisis go to waste.” Innovators around the world are taking the saying seriously, responding to the disruption caused by the COVID-19 pandemic with creative digital solutions.

The initiatives we highlight here are markedly diverse: the overnight transformation of Sri Lanka’s 125-year-old live tea auction; the world’s first central bank digital currency in The Bahamas; and the rapid pivot from a taxi-hailing app in Kampala, Uganda, to a thriving e-commerce platform.

All three share a common characteristic: an innovative, entrepreneurial spirit born of an urgent need. The Bahamas initiative responded to a need to extend financial services to residents of remote islands whose lack of access was exacerbated by extreme weather. In Sri Lanka, the tea industry—fundamental to the economy and employing millions—came to a sudden...

Beyond its immediate impact, the pandemic has also clouded the outlook for commercial real estate, given the advent of trends such as the decline in demand for traditional brick-and-mortar retail in favor of e-commerce, or for offices as work-from-home policies gain traction. Recent IMF analysis finds these trends could disrupt the market for commercial real estate and potentially threaten financial stability.

The financial stability connection

The commercial real estate sector has the potential to affect broader financial stability: the sector is large; its price movements tend to reflect the broader macro-financial picture; and, it relies heavily on debt funding.

In many economies, commercial real estate loans constitute a significant part of banks’ lending portfolios. In some jurisdictions, nonbank financial intermediaries (e.g., insurance firms, pension funds, or investment funds) also play an important role despite the fact that banks remain...

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You can add location information to your Tweets, such as your city or precise location, from the web and via third-party applications. You always have the option to delete your Tweet location history. Learn more

Although the outlook for the region has improved since October 2020, the -1.9 percent contraction in 2020 remains the worst performance on record. Sub-Saharan Africa will be the world’s slowest growing region in 2021, and risks falling further behind as the global economy rebounds. Our latest Regional Economic Outlook: Sub-Saharan Africa takes a close look at the issues.

On current forecasts, per capita GDP in many countries is not expected to reach pre-crisis levels until the end of 2025. Limited access to vaccines and the region’s lack of fiscal space are expected to weigh on the outlook. As a result, the gap between sub-Saharan Africa’s growth and the rest of the world is expected to widen further over the next five years.

To support future growth and transformative reforms, international help will be required to meet the $245 billion in additional external funding needs that sub-Saharan Africa’s poorest countries face over the next five...

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The Spring Meetings will take place virtually on April 5-11, 2021. Tune in on our website and in social media to stay on top of the discussions, and watch events on the IMF Live page. #IMFMeetings.

Schedule

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You can add location information to your Tweets, such as your city or precise location, from the web and via third-party applications. You always have the option to delete your Tweet location history. Learn more

Systemic financial stress—associated with long-lasting economic damage—has been largely avoided so far, owing to the unprecedented policy actions taken. However, the path to recovery remains challenging, especially for countries with limited fiscal space, and is made harder by the differential impact of the pandemic.

Lessons from history

The extent of the recovery will depend on the persistence of the economic damage, or “scarring,” in the medium-term. This will vary across countries, depending on the future path of the pandemic; the share of high-contact sectors; the ability of businesses and workers to adapt; and the effectiveness of policy responses.

These unknowns make it hard to predict the extent of scarring but there are some lessons we can draw from history. Severe recessions in the past, particularly deep ones, have been associated with persistent output losses from reduced productivity. Although the pandemic has spurred increased digitalization...

Aurélia Nguyen, Managing Director of the COVAX Facility and Sabina Bhatia, Deputy Secretary of the IMF, discuss the challenges of vaccine procurement and distribution, and highlight the need for international cooperation to secure global and equitable access to vaccines. Kristalina Georgieva, Managing Director of the IMF, will give opening remarks.

Join the conversation via #IMFinspired