ECLAC indicates that the recession could reach -2.3% in Central America

Cepal BVM PR1ME Capital ECLAC indicates that the recession could reach -2.3% in Central America

According to private analysts of the BMV, it will be of -7.1% in Mexico

According to the latest estimates of the Economic Commission for Latin America and the Caribbean (ECLAC), Central America will have a contraction of -2.3% due to the fall in tourism and the reduction in activity of the United States, its main trading partner and source of remittances; However, private sector analysts surveyed by the Bank Of Mexico (Banxico by its acronym in Spanish) adjusted their forecasts downward, so they now expect a further contraction in Mexico. Instead of what was expected by ECLAC, bank and brokerage experts from 38 analysis groups, consulted by the Central Institute between April 29 and 30, cut their forecast to a -7.1% contraction in the Gross Domestic Product of the country.

However, these same analysts consider that in next year there will be a performance of 2.2%. Regarding inflation, analysts estimated that the growth of the Consumer Price Index (CPI) will be 2.9% in 2020.

One of the main causes for this contraction, according to analysts, is the lack of measures that have been taken in the face of the pandemic. US management consulting firm, Boston Consulting Group, noted that Mexico was slow to quarantine as it officially declared lockdown on March 16. BCG also analyzed that Mexico would be ending its lockdown between the first and third week of July.

The Executive Secretary of ECLAC, Alicia Bárcena, presented this Tuesday, April 21, the special report COVID-19 No. 2, entitled ‘Dimensioning the effects of COVID-19 to think about reactivation’, on monitoring economic and social effects of the current crisis derived from the impact of the coronavirus in the region. The main result of this study is that in the Latin American and Caribbean region an average regional contraction of -5.3% is forecasted for 2020.

According to the report, The crisis will be the worst in its entire history. To find a contraction of comparable magnitude, we would need to go back to the Great Depression of 1930 (-5%) or even more to the year of 1914 (-4.9%).

The document also states that the coronavirus crisis has been transmitted to Latin America and the Caribbean through five channels: a reduction in international trade, the fall in the prices of primary products, the intensification of risk aversion and worsening of global financial conditions, a lower demand for tourist services and a reduction in remittances.

In the detail of its other projections, the agency predicts that South America will contract -5.2% due to the fact that several countries in this area will be greatly affected by the fall of production and activity in China, which is an important market for its exports; while the Caribbean would contract by -2.5%, due to the reduction in the demand for tourist services.

Alicia Bárcena gave a message to the G-20 leaders to improve the economic situation in the Latin American and Caribbean region.

“They (the leaders) must support multilateral organizations to lend at favorable interest rates and relieve the debt of highly indebted countries, postponing or canceling it. Otherwise, payments will be impossible and the fiscal space will be compromised. Exceptional measures are required to deal with an unprecedented crisis. There will be no progress without international cooperation and solidarity, “stressed the Executive Secretary of ECLAC.

The International Monetary Fund has also played its part, offering approximately 50 billion dollars through fast-disbursed emergency financial services to low-income and emerging market countries that may request support. Of that sum, 10 billion dollars are available to the poorest members (out of 189 countries), interest-free, through the Quick Credit Service.

Source: ECLAC, Infosel, Boston Consulting Group, International Monetary Fund



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