The scale of the coronavirus-induced economic crash expected in Latin America could upend the region's financial rules for years to come, throwing up big obstacles to re-imposing painful spending cuts and austerity.
BRASILIA - The scale of the coronavirus-induced economic crash expected in Latin America could upend the region’s financial rules for years to come, throwing up big obstacles to re-imposing painful spending cuts and austerity.
“Should countries double down on upfront expenditure to ease the economic pain and help the recovery? Or do the old fiscal rules still apply? Governments may find it is politically untenable to double down on austerity,” he said. Based on traditional measures, the low rankings show little fiscal room to cope with the crisis and indeed some policymakers are warning that investors will demand more fiscal balance once it is over.
Some of the numbers being bandied about are without precedent. Goldman Sachs expects the region’s economy to shrink by 3.8% this year, the biggest decline since World War Two. Economists at Morgan Stanley think it will be even worse, and pencil in a 4.6% GDP crash.
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