Due to the COVID-19 outbreak, Latin America suffered a severe economic crisis last year. As the epidemic in various countries gradually eased, coupled with rising commodity prices in the international market, Latin America's economy has shown a trend of recovery this year. But experts say that despite the improvement in the short term, Latin America's economy still faces risks in the long term.

The Economy of Latin America and the Caribbean is expected to grow by 5.8 percent in 2021, up 1.2 percentage points from its April forecast, mainly due to an improvement in two major economies, Brazil and Mexico, the International Monetary Fund (IMF) said in its world Economic Outlook update released on July 27.

Since the beginning of this year, a number of Economic indicators in Brazil have improved. Brazil's economy grew 1.2 per cent and 0.2 per cent in the first two quarters of the year compared with the previous two, marking its second consecutive quarter of positive growth. In a mid-July report, Brazil's economy ministry forecast that the economy would grow 5.3 per cent this year, up from a May forecast of 3.5 per cent. Brazil's business and services index rose 4.2 percent in July from the previous month, the highest since March 2014, indicating a gradual recovery in the two key sectors, according to a report released on July 29 by Brazilian think tank Fundus Vargas.

On the foreign trade front, Brazil, a leading exporter of commodities, has continued to shine this year. Statistics released by the Foreign Trade Secretariat of the Brazilian Ministry of Economy show that from the beginning of this year to the fourth week of July, Brazil's total imports and exports reached 269.05 billion US dollars, achieving a trade surplus of 43.67 billion US dollars, up 52.3% year on year.

Mexico's recovery is also strong. Mexico's economy grew 19.7% in the second quarter from a year earlier, according to data released by the national Geographic Statistics Agency on July 30th. Mexico's BASE Financial Group reports that Mexico's economy has largely recovered from the beginning of the COVID-19 outbreak in late February last year.

Mexico's economy is expected to grow by 6% this year, 0.7 percentage point higher than previously forecast, Deputy Finance Minister Gabriel Yorio said July 29.

Many Latin American economies are recovering on the back of accelerated resumption of work and rising demand for commodities. Other Latin American countries, including Argentina and Colombia, have also raised their growth forecasts for this year. The International Monetary Fund forecasts that Argentina is on track to grow 6.4% this year.

The United Nations Economic Commission for Latin America and the Caribbean (ECLAC) said in a report released in early July that the region's economy is expected to grow 5.2 percent this year, up from 4.1 percent forecast in April. The report noted that the latest growth forecast reflects the low base effect and the positive effect of the global economic recovery in boosting external demand.

Overall, however, analysts say there are still long-term risks to the region's economy. At present, the ratio of public debt to GDP in Latin America has reached 56.3%. Latin American countries are faced with long-term risks such as high external debt burden, sluggish investment, underemployment and environmental degradation, and their economic recovery will be challenged by deep problems such as poverty and single economic structure. Eclac forecast that next year, Latin America's economy is expected to grow 2.9 percent, slower than this year, or will struggle to shake off the pre-pandemic low growth, structural problems will continue to weigh on Latin America's economic growth.