In contrast to what happened in past episodes of world recession, this time the fall in growth of the Latin American and Caribbean (LAC) region has not exceeded that of the world economy. In fact, the performance of the region has been as good as, or better than, many other emerging market economies.
This reflects, among other things, that the region avoided falling into an internal financial crisis of its own. The impact of the recession has been substantial, but following the contraction of output recorded in the first half of this year, the LAC region is recovering, and is expected to grow at a moderate pace in 2010.
As Chart 1 shows, the region has had a better performance in this crisis than in the past.
The chart compares the path of growth of the region’s GDP with that of the world economy in several past episodes of world recession. In past crises, LAC growth fell much more than the world average (left panel). In the recent crisis, however, the region’s growth has stayed in line with the world average (right panel).
Chart 2 shows that the region’s recent performance has been better than that of other emerging market economies. Since the beginning of the crisis, forecasts of 2009 growth have been marked down across the board, but for countries of the LAC region these markdowns in general have been much smaller than for other countries.
A key difference was that in the LAC region, external shocks did not trigger internal financial crises, which in turn would have amplified the total impact of the external shocks on economic activity.
It’s important to analyze the reasons why the region had a better performance in this crisis–this will be the topic of the next blog. More detail will be available in the October 2009 edition of Regional Economic Outlook: Western Hemisphere, which will be posted October 23.