MercoPress. South Atlantic News Agency

IMF: Uruguay's economy will fall 3% in 2020; Latin America's, 5.2%

A pedestrian walks in front of an isolated Solís theater in Montevideo. SEBASTIÁN ASTORGA / MERCOPRESS

According to the estimates of the International Monetary Fund (IMF), the Uruguayan economy will decrease by 3% this 2020. The “great closure” has been how the international body has defined, as the title of its World Economic Outlook, government measures against the global pandemic caused by the COVID-19.

However, the same report, published this Tuesday, announces that there would be a rapid rebound and the economy would recover 5% in 2021, depending on the evolution of the pandemic.

Uruguay would be behind the regional average since Latin America would lose a 5.2% drop in GDP due to the restrictions and the authorities' efforts to contain the pandemic. The recession would be assured for all the countries of the continent, estimating a recovery for 2021 in the best of scenarios.

Seeing “the light at the end of the tunnel”, as expressed by the President of Uruguay, Luis Lacalle, his government plan has been delayed when colliding with a sanitary emergency situation decreed just two weeks after the inauguration of his government on March 1st. Following the Lacalle metaphor, countries like Uruguay do not yet know how close they would be to the end of the tunnel of the global economic turmoil.

The largest economy in Latin America, Brazil, will have a contraction of 5.3%, Mexico of 6.6% and Argentina – amid the full restructuring of its debt – will have a fall in GDP of 5.7% this year.

According to the latest update of the IMF forecasts made at the beginning of the year, the region was in a lackluster growth situation with an expansion forecast for this year of 1.6%, below the global average of 3.3% in 2020.

But then, the crisis due to the epicenter of the new coronavirus, first in China and then in Europe, had not settled. With a pandemic that has left more than 117 thousand dead in the world and forced to paralyze the activity to try to stop the advance of the virus, against which governments around the world make statements in a tone of war.

The very nature of this scenario differs from other crises. Combining the effect of confinement measures, with the closure of workplaces, disruption of supply chains, layoffs and falling income.

An emerging market region like Latin America declines in the search for safe assets, such as the dollar. This provoked a sharp collapse of local currencies, some of which have hit record lows, and sharp falls in the stock markets.

For 2021, the projected recovery with a growth of 3.4% is also below the average for emerging markets (6.6%) and the global compilation (5.8%).

However, the Fund warned that recovery next year depends “critically” on the pandemic easing in the second half of 2020, and the restrictions may be phased out.