The World Bank forecasts that Latin America will face the worst economic recession in a century in the aftermath of the COVID-19 pandemic. The crisis would be the worst since 1901 when financial data started to be collected.
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During a webcast hosted by the Council of the Americas on Wednesday, the president of the institution, David Malpass, said that it is expected a gross domestic product (GDP) contraction of more than 7% for 2020.
The GDP is the market value of all final goods and services from a nation in a given year. It provides an economic snapshot of a country, used to estimate the size of an economy and growth rate.
According to a report released on July 1, 2020, the region's economic activity is projected to contract by 7.2 percent, much more steeply than during the global financial crisis of the 1980s Latin American debt crisis.
The organization, which provides loans and grants to the governments of poorer countries for pursuing capital projects, explains that the sharp fall in global commodity prices is a headwind for much of the region, and particularly for oil and gas producers, given the plunge in global energy prices.
In this sense, it has calculated that Brazil's economy will contract by 8% in 2020, due to mitigation measures, plunging investment, and soft global commodity prices.
On the other hand, Mexico will face the downturns of slumping exports, significantly tighter financing conditions, and a sharp drop in oil prices as well as a halt in tourism.
The plunge will severely hit Colombia, Ecuador, and Bolivia in oil and gas prices, while the Caribbean's falling tourism activity is going to slow down considerably the possibility of economic growth the rest of the year.
The World Bank also warns that the region will also face persistent risks related to
natural disasters and weather-related events, including the upcoming hurricane season in the Caribbean.