Latin America headed for ‘unprecedented’ recession, Goldman Sachs says

Latin America’s economy is expected to plunge into its deepest recession since World War II this year, with growth shrinking 3.8 per cent as a result of the coronavirus pandemic, according to economists at Goldman Sachs.

Given the tight restrictions on movement, travel and business across the region, Latin America’s economy is expected to “hit a wall and face a sudden stop” in the second quarter of the year, the bank’s economists said in a research note.

The contraction will be more severe than the 2.1 per cent fall in regional GDP in 2009, or the 2.4 per cent decline in GDP during the South American debt crisis in 1983, the economists wrote.

“Latin America’s macroeconomic and financial environment continues to deteriorate, and at a pace with no historical precedent,” they wrote.

“The forecasted real GDP contraction (…) has no precedent in the post-war period, despite several episodes of severe regional crisis and financial sudden stops.”

Goldman Sachs’ economists now expect Brazil’s economy to contract 3.4%, with Mexico’s GDP falling 4.3% and Argentina’s by 5.4%.