Like many markets around the globe, Latin America’s economy will rebound in 2021 as the stringency and length of new lockdowns subside. However, businesses should expect the sales rebound that they experienced in the second half of 2020 to wane coming into 2021, as the structural damage of COVID-19 to the region’s economic fabric, jobs, and overall savings levels begins to surface. For economic recovery to be sustained in 2021 and beyond, private investment needs to fill the void of diminishing government stimulus. Governments will need to strike a fiscal spending balance in 2021 to support—or at least not hurt—economic recovery, and to signal fiscal responsibility to creditors and investors.

Latin America will not regain 2019 economic activity levels until 2023. Widespread bankruptcies and savings erosion during 2020 lockdowns will constrain investment and spending capacity out of the COVID-19 pandemic. Latin America will not regain 2019 economic activity levels until 2023—two years later than Asia Pacific.

The 2020 rebound will be followed by demand stabilization at subdued levels in 2021 as government stimulus is gradually unwound. Latin American governments have spent well beyond their fiscal capacity in 2020 to provide a respite to companies and households. Governments will need to signal fiscal responsibility by starting to unwind stimulus in 2021, and through a combination of selected spending cuts and tax increases.

Sustained recovery in 2021 and beyond depends on how quickly private investment can fill the void of retrenching government spending. The region’s sustained recovery depends on its ability to stave off new, onerous lockdowns in 2021 and entice new investments in the private sector that can boost employment recovery. Another year of halted economic activity and additional fiscal stimulus rounds would put the region in an extremely difficult financial situation to recover from in 2022 and beyond.

Download an executive summary of our Latin America 2021 Outlook for a full breakdown of the global drivers of the region in 2021 and clear actions for you to mitigate impacts to your business:

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