NEW YORK, March 19 (Reuters) - Governments across Latin America and the Caribbean should take “decisive actions” to limit the negative economic impact of the coronavirus pandemic and avert a humanitarian crisis in the region, the International Monetary Fund said on Thursday.
As is the case across the globe, measures to contain the spread of COVID-19 are hitting the region, which is heavily dependent on oil and other commodity exports as well as tourism and remittances -all among the hardest-hit economic activities as the global economy slows to a crawl.
Regional governments “should use cash transfers, wage subsidies and tax relief to help affected households and businesses to confront this temporary and sudden stop in production,” wrote Alejandro Werner, the IMF’s head for the Western Hemisphere, in a blog post.
Werner said central banks should allow banks to operate even if their capital levels shrink below current regulations and “increase monitoring, develop contingency plans, and be ready to provide ample liquidity to financial institutions, particularly those lending to small and medium-sized enterprises.”
Other monetary and fiscal stimulus will likely be needed and more effective once economic activity starts to pick up, he said, as they can help “lift confidence and aggregate demand.”
The pandemic threw a wrench to the region’s economy, which was beginning to slowly recover.
“For the region, the recovery we were expecting a few months ago will not happen and a 2020 with negative growth is not an unlikely scenario,” said Werner.
Wall Street is already pricing in a contraction. JPMorgan said Thursday it expects Latin America to be among the hardest hit emerging markets, with 2020 GDP contraction exceeding 2% in the region and over 3% in Colombia, Brazil and Mexico.
“I would like to iterate the importance of decisive actions by all of us to limit the economic fallout from the coronavirus and avert a humanitarian crisis,” Werner said.
“The Fund stands ready to assist and work with member countries in these difficult times.
The report didn’t specifically mention Venezuela, which recently asked the Fund for $5 billion in financing.
Reporting by Rodrigo Campos; Editing by Andrea Ricci