Social and economic impact of COVID-19 and policy options in Uruguay
May 21, 2020
The economic crisis caused by COVID-19 is an event without precedent in the modern economy and probably associated with the most disruptive effects since the Second World War, or even since the Great Depression. Evidence of this is the worldwide economic policy response, which also is without recent precedents. Within the orbit of the emerging econo- mies, the situation is being aggravated by episodes of “flight to quality”, which brings additional pressure on the financial variables and access to financing in the international markets.
In the case of Uruguay, the economy will go into recession in 2020, there will be a significant real depreciation of the peso and higher inflation. All this will have negative effects on employment, incomes, poverty and inequality. Although the measures adopted up to now are going in the right direction in the light of what has been experienced internationally, and the restrictions faced by the country, they are still insufficient to offset the affected activities and mitigate the impact on the most vulnerable population. In this context, the purpose of this document is to analyse the channels of transmission of the shock and the impact that it might have on the Uruguayan economy, and the measures that have already been taken and additional measures that could be deployed to soften the impact on the most vulnerable sections of Uruguayan society.