Economies in Latin America and the Caribbean (LAC) are on track to recover from the COVID-19 crisis, but the scars of the pandemic remain and the need for more dynamic, inclusive and sustainable growth is increasingly urgent, according to a new World Bank report,Consolidating the recovery, seizing green growth opportunities”.
After a 6.9% rebound in 2021, regional GDP is expected to grow by 2.3% this year and another 2.2% in 2023, with most countries reversing GDP losses from the pandemic crisis. However, these modest projections place the regional performance among the weakest in the world at a time when the region faces significant uncertainties as new variants of the virus may emerge, inflationary pressures mount and war in Europe threatens. the global recovery. In fact, regional growth projections were revised down by 0.4% after the Russian invasion of Ukraine.
On the positive side, vaccination is widespread across the region, businesses are hiring again and schools are reopening. Nevertheless, the long-term scars of the crisis remain and require special attention. Poverty rates hit 27.5% in 2021 and are still above their pre-COVID levels of 25.6%, while learning losses could lead to a 10% drop in future incomes for millions. school age children. To avoid reverting to the low growth rates of the 2010s, countries in the region need to embark on long-delayed structural reforms and seize the opportunities offered by a greener global economy.
“We are in a global context of great uncertainty, which could impact the post-pandemic recovery. In the long term, however, the challenges of climate change will be even more pressing, requiring us to urgently shift to a greener, more inclusive and productivity-boosting growth agenda,” said Carlos Felipe Jaramillo, Vice President for Latin America and the Caribbean at the World Bank.
According to the report, growth driving reforms in infrastructure, education and innovation remains paramount, and key investments should be financed through more efficient spending and revenue mobilization. But these much-needed reforms should address key forces shaping the global economy, including climate change.
Over the past two decades, the report points out, countries in Latin America and the Caribbean have lost the equivalent of 1.7% of their annual GDP due to climate-related disasters and up to 5.8 million people could be pushed into extreme poverty in the region by 2030. Agriculture is likely to be hit hard, with crop yields declining in virtually all countries, and the stability of energy production compromised by changes of the hydrological cycle.
“LAC has huge green comparative advantages, providing opportunities for new industries and exports. It has vast renewable energy potential, significant lithium and copper resources used in green technologies and rich natural capital, all increasingly valued in a world where global warming and energy security take center stage. ., said William Maloney, chief economist for Latin America and the Caribbean at the World Bank. “However, both adapting to climate change and taking advantage of these opportunities for diversified and sustained growth will require improving the region’s capacities to identify, adapt and implement new technologies.”.
The report offers a combination of policies that can help seize green growth opportunities. These include:
- Pricing policies that encourage the adoption of existing low-carbon technologies, for example by reforming fossil fuel subsidies and establishing carbon taxes and emissions trading schemes.
- Credible verification mechanisms that facilitate access to green bonuses. This makes it possible to export carbon credits/offsets and to tap into the green finance market.
- Improved systems to identify and adopt technologies to mitigate and adapt to the region’s impact on climate, while leveraging its natural advantages for growth. Climate-smart agriculture, for example, can help countries adapt to changing rainfall patterns.
- Political commitments, credible long-term plans, complementary investments and risk reduction mechanisms, which reduce uncertainty and accelerate the adoption of technologies that will promote growth while adapting to climate change and mitigating.