A Post COVID-19 Fiscal Strategy for Latin America and the Caribbean by Alejandro Izquierdo and Carola Pessino published by IDB (4/2021).
“Even before the COVID-19 crisis, Latin America and the Caribbean faced stagnant growth. GDP, however, fell by 7.4% in 2020, and the region’s public finances were hit hard. With tax collection dropping 25% (and bouncing back only partially), and spending rising by about 3.5% of GDP as governments sought to attend to health and preservation policies to save households, jobs, and firms, the average fiscal deficit rose to about 9% of GDP in 2020, way above pre-crisis levels of 3%. IDB projections suggest that average debt may ascend to almost 80% of GDP by the end of 2022, a frightening rise from its pre-crisis average of 58%.
Fiscal sustainability is clearly at stake and fiscal reform, including significant changes in tax and spending policies, are urgently needed. They are essential to reversing fiscal deterioration, promoting growth, enhancing equity, and preventing the next fiscal crisis. How is the region going to tackle these reforms? What is the likelihood that this dramatic deterioration will be reversed? And which are the right tools to get the job done?…”
