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Report on the Latin American economy. First half of 2021. Outlook, vulnerabilities and policy space

International Economics and Euro Area Department

Economic Bulletin, 2021, issue 2/2021, 35 pages

Abstract: The economic recovery in Latin America continued into the first part of this year, but lost momentum owing to the adverse course of the pandemic. Against this macro-financial backdrop, the region’s banking systems remain healthy, although some indicators, such as bank profitability, have started to feel the effects of the persistence of the crisis. The strength of the recovery will be chiefly determined by the course of the pandemic, in particular by how fast the vaccine is rolled out and its effectiveness. It will also hinge on the momentum of foreign demand and commodity prices, the resolution of potential social tensions in the region, global financial conditions, the degree of support from economic policies, whose headroom has narrowed, and regional and global economic safety nets. Given the high level of uncertainty surrounding the economic outlook, the report presents alternative scenarios relating to a series of epidemiological, economic and financial variables. However, it should be noted that, broadly speaking, the region has fewer structural vulnerabilities now than in previous episodes of turmoil. In any event, the complex economic situation reinforces the need for institutional and economic reform agendas that address the region’s structural problems.

Keywords: health crisis; mobility; commodities; financing conditions; capital flows; household savings; economic policies; public debt sustainability; global and regional safety net. (search for similar items in EconPapers)
JEL-codes: C11 E52 E58 E62 F01 F30 F47 (search for similar items in EconPapers)
Date: 2021
Note: Analytical Articles
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