The varied experience of emerging market economies during the global financial crisis underscores an important lesson: good policies beget good outcomes. Investing during good times to develop a sound policy framework that delivers stronger fundamentals and lower vulnerabilities yields large dividends during crises. In the current crisis, low-vulnerability countries had lower output declines, more space to undertake countercyclical policies, and quicker recoveries.
In this year of global recession, fiscal policy has been able to play a supportive role in some countries of the Latin America and Caribbean (LAC) region. Even as the downturn caused fiscal revenues to fall, many governments were able to avoid cutting expenditure, and some were able to provide a sizable positive fiscal impulse, actively raising expenditure to provide a boost to domestic demand and GDP.
The Commodity Connection: Rising Commodity Prices and the Outlook for Latin America and the Caribbean
As the world economy emerges from recession, it’s worth thinking about how the composition of this recovery, in terms of which countries expand faster, will affect commodity prices—and how those prices influence the outlook for economies of the Latin American and Caribbean (LAC) region.
Although this time the external shocks were very strong in this year of global crisis, the Latin American and Caribbean (LAC) region has performed notably better than in the past, and also better than many other emerging market countries. This improvement can be attributed to the fact that the region faced the crisis equipped with economic policy frameworks that were more solid and credible than in the past, and with smaller financial, external, and fiscal vulnerabilities.