Vaccines won’t heal all scars

While vaccines offer Latin America a route out of the crisis, lingering public debt issues will hold back the regional recovery and raise the risk of long-lasting economic scarring. As a result, after a sharp 6.9% drop in 2020, we expect a modest 5.0% rebound in Latin America’s GDP this year, and 3.4% growth in 2022. These forecasts imply that the recovery will be slower than in most other EM regions, with output remaining well below its pre-crisis trend in the coming years. One consequence is that interest rates will remain low for longer than most expect. We’re more optimistic on the outlook for the region’s financial markets and currencies, but the threat of a populist shift in this year’s wave of elections poses a major risk.