How has the Coronavirus pandemic affected the economy?

September 26, 2022

Two years after the appearance of the Coronavirus, its impact is still latent in all areas of life. The economy has been irreparably affected even in the long term, stay tuned for the details.

At the beginning of 2020, Covid-19 destroyed the plans of governments, companies and people in general, who did not find in any emergency manual the steps to follow to face such an unexpected situation. Definitely, the Coronavirus surprised the world and showed that it was not prepared for a pandemic. Global public health was compromised in a short time, and the economy has since suffered the consequences.

This is how it all began

Restrictions implemented in order to minimize the spread of the virus as well as to ease the burden on healthcare systems had a strong impact on economic growth. Long periods of confinement and mobility bans forced many businesses to close their doors, and many informal workers were stranded.

On the other hand, the effects proved to be most profound in those countries that depended heavily on tourism, exports, international trade and external financing. In fact, this is the biggest recession since World War II and the first time since 1870 that so many economies have experienced a decline in per capita output. By the end of 2020, the Covid-19 crisis had pushed 88 million people into extreme poverty.

The world did not stop

By mid-2021, the vaccination days generated enough confidence to talk about a return to normalcy and yield to restrictions. This generated the reopening of the economy, giving the sensation of growth through production and consumption. However, some economists considered this event as a rebound after the abrupt fall suffered.

An untimely exit from restrictions after months of lock-in led to bottlenecks in the global supply chain. Traffic jams at the main ports in different parts of the world raised shipping prices to historic highs, affecting the pockets of the end consumer.

Given this reality, by the end of 2021, one out of every four people in Latin America had not recovered the job they had before the health crisis. Likewise, nearly 50% of households had not achieved the same level of income they had before the pandemic, according to data from the World Bank and the United Nations Development Program (UNDP),

By the beginning of 2022, among the variants of the virus that continued to appear, debt, income inequality and rising inflation, the World Bank warned that the slowdown in economic growth will be present until the end of 2023. In this regard, growth prospects for Latin America are 2.6% in 2022 and 2.7% in 2023, compared to a global advance of 4.1% and 3.2% expected for the same years.

Economic effects of the pandemic in Latin America

In the eyes of all, the Coronavirus pandemic exposed the region’s inequalities, disproportionately affecting the poorest and vulnerable groups. In addition, some prevailing effects of the pandemic on the economies of Latin American countries include:

  • Historic inflation rates.
  • Informality and unemployment.
  • Loss of value of the main currencies.
  • Increase in public debt.

The World Bank determined that the recovery of Gross Domestic Product (GDP) to pre-pandemic levels will be uneven for each Latin American nation. In addition, it shared the following information:

  • Brazil’s economy will slow to 1.4% by the end of 2022 and then rebound to 2.7% by 2023.
  • As for Mexico, growth is expected to slow to 3% in 2022 and 2.2% in 2023.
  • Argentina, meanwhile, will see its economy slow to 2.6% in 2022.
  • The deep cyclical rebounds seen in Colombia, Peru and Chile will weaken in both 2022 and 2023.
  • Central America will maintain solid growth of 4.7% by 2022.
  • Most Caribbean countries project accelerating growth through 2022.

Although the economic outlook has been predominantly negative by any measure, and without taking into account the high human cost, the pandemic has left some positive aspects such as the acceleration in the adoption of new business models based on digital platforms. Likewise, new behaviors have been generated in consumers, driving them to make smarter purchases, even. Reinvention of companies, development of startups and entrepreneurship, proliferation of freelancers, teleworking and Edtech are also some consequences brought by the crisis for Covid-19.

In short, the impact of the Coronavirus pandemic is still ongoing and international cooperation is imperative to mitigate the effects. Protecting the most vulnerable populations and strengthening the capacity of countries to handle similar situations in the future has become the most important lesson learned.