Knowledge Note

“Recent developments, including a new oil price shock, and the outbreak of the Covid-19 epidemic will push the LAC region into recession. “

After a period of rapid economic growth associated with high commodity prices, the Latin America and the Caribbean region had entered a phase of lackluster performance. Recent developments, including a new oil price shock, and the outbreak of the Covid-19 epidemic will push the region into recession. Many countries are struggling to contain the spread of the Covid-19 epidemic while avoiding a dramatic decline in economic activity. The report analyzes how to think about this tradeoff. It estimates the potential health costs, assesses the effectiveness of diverse containment strategies, and discusses how large the economic cost could be. The current crisis is unprecedented because it combines a fall in global demand, tighter financial conditions and a major supply shock. The response needs to consider how to socialize the losses, how to prevent a collapse of the financial sector, how to protect jobs and livelihoods, and how to manage and divest the assets that will inevitably end up in the hands of the state.

This document is an Executive Summary of a recent analysis on the Latin America and Caribbean region's economy, in the time of the COVID-19 pandemic, presented in the April 2020 edition of the LAC Semiannual report.

To read the entire report in English, please click here.