Semi-annual report of the Latin America and Caribbean region: "The Cost of Staying Healthy"

Download the report "The Cost of Staying Healthy"

The World Bank's semi-annual report entitled “The Cost of Staying Healthy” by the LAC Chief Economist Office, analyzes the economic impact of the COVID-19 pandemic in the region and the need to improve the coverage and quality of health care systems.

Latin America and the Caribbean is the region hardest hit by the COVID-19 pandemic, suffering lower foreign demand, increased economic uncertainty, a collapse of tourism and the consequences of months under lockdown to try to contain the spread of the disease.

Governments should focus on better coverage and quality of health care systems, including affordable pharmaceuticals, to combat the COVID-19 pandemic.

High spending on emergency social transfers are needed, but countries must find ways back to fiscal consolidation in the future.

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In detail:

Economic Impact:

• LAC is suffering from lower foreign demand, increased economic uncertainty, a collapse of tourism flows and, especially, the consequences of months under lockdown to try to contain the spread of the disease.

- Gross Domestic Product (GDP) in the Latin America and Caribbean region (excluding Venezuela) is expected to decline 7,9% in 2020. A return to growth of 4% is expected in 2021.

• The crisis follows several years of disappointing economic growth, limited progress on social indicators, and comes right after a wave of popular unrest.
• The impact of lockdown measures fell disproportionally on households with informal jobs.

- Formality should be encouraged, and comprehensive population registries are needed for social transfers to reach many of those who live from hand to mouth.

• However, there are some positive signs.

- Global trade in goods is returning to pre-crisis levels and commodity prices have held relatively well.

- After a sharp initial decline, remittances are generally higher than a year earlier.

- Surprisingly few countries have lost access to international financial markets.

- The stimulus packages set up by several governments in the region were remarkably strong, despite the fiscal constraints, and much of the additional resources went to social transfers.

Health Costs

• Many countries in the region are relaxing lockdowns and experiencing a stable or declining number of deaths over the past two months.
• Governments should adjust health and safety standards across sectors and activities, including schooling, so that the probability of contagion remains low while life goes on. Coverage and quality of health care systems should be improved to support those particularly vulnerable to COVID-19, such as individuals with other morbidities.
• The COVID-19 pandemic drove up the economic cost of protecting the health of the population.
• Health care costs are a significant share of government budgets and impose a heavy burden on household finances.
• The distribution of health costs in LAC is often regressive. Reducing this burden could lift millions out of poverty.
• Pharmaceuticals are the largest part of out-of-pocket health expenditures and prices vary widely between and within countries.

Public Debt

• Public debt levels in the region rose sharply.
• Emergency social transfers may still be needed for the time being, but countries will need to find ways back to fiscal consolidation.
• Reorienting taxes and government expenditures in a way that supports job creation, service delivery and infrastructure development is needed to put the region back on a path of inclusive and sustainable growth.