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Latin America's Long and Winding Road to Recovery- Regional Economic Outlook for Latin America and the Caribbean

Latin America's Long and Winding Road to Recovery

The outlook for Latin America and the Caribbean shows that an initial rebound in economic activity was stronger than expected as lockdowns were gradually eased; however, the recovery has been uneven and incomplete. Real GDP is projected to grow by 6.3 percent in 2021, followed by a more moderate growth of 3 percent in 2022.

Public debt has increased by more than 10 percentage points relative to 2019, and employment recovery continues to be slow. Inflation is also on the rise in many countries but is expected to revert to around 3 percent by 2023. Central banks in the region will likely face difficult trade-offs keeping long-term inflation expectations anchored amid increasing inflationary pressures and persistent labor-market slack.

A lasting legacy: The pandemic is expected to leave long-lasting scars in the region. Gaining medium-term growth momentum is crucial, especially in narrowing the gap opened by the pandemic and avoiding a further divergence relative to advanced economies. 

Countries should continue to allocate sufficient resources for health spending including vaccination and targeted support to households and firms. Policies should foster inclusive growth, including through progressive and growth-friendly tax reforms and measures to intensify climate change adaptation and mitigation.

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