XIV Международная студенческая научная конференция Студенческий научный форум - 2022

The health crisis caused by COVID-19 plunged the economy into a recession that led to a spike in poverty. The Government deployed different initiatives to protect the most vulnerable population, such as cash transfers and credit deferrals. However, the health crisis exposed some structural weaknesses such as the reduced capacity of the health system, the limited impact of the poor targeting of social protection programs, the high labor informality and the high macroeconomic imbalances.

In the first months of 2021, the economy has shown significant signs of recovery due to the improvement in the international environment and the relaxation of the isolation measures adopted at the start of the pandemic. It is important that the Government and society join forces to advance in vaccination and thus enable a full recovery of economic activity and employment. High public debt and modest international reserves could limit efforts to boost the economy through expansionary policies alone, especially if the private sector does not play a more active and sustained role.

In addition to the immediate challenges associated with the health crisis, a sustainable recovery of inclusive growth poses some structural challenges for the country. A consolidation process would contribute to strengthening confidence in macroeconomic management and the sustainability of the exchange rate, as well as generating some policy space to deal with changes in the international environment or adverse climate events in the future.

Limited gas reserves, an increasingly challenging regional market and global efforts to decarbonize the energy sector make it necessary to seek alternatives to gas exports. There are still some remaining opportunities in this area that, added to Bolivia's significant mining potential, could be exploited by improving the investment environment, mainly in the fields of labor and tax regulation, with a view to boosting private investment and productivity, in time to reduce high informality. For this growth to be sustainable in the long term, it is necessary to take precautions to avoid environmental degradation and mitigate the effects of climate change on the population and economic activity. This requires addressing critical issues such as high deforestation, pollution and over-exploitation of some watersheds, associated with the growth of cities and small-scale mining, and the possible adverse effects of extractive activities on delicate ecosystems such as protected areas and the salt flats.

Similarly, it is possible to improve the efficiency and progressivity of public policies in such a way that the most vulnerable population can be protected and access and quality of public services can be improved without increasing spending in an unsustainable manner. For this purpose, the management of health and education services and social protection networks can be made more efficient. In the same sense, the impact of public spending on the population can be enhanced, improving coordination between levels of government and strengthening the capacities of subnational governments.

The IGAE is an indicator that shows the evolution of the country's economic activity, on a monthly basis. It is defined as a monthly synthetic index, whose objective is to provide an estimation of the behavior of economic activity in the short term.

“Global growth as of June 2021 is 8.7%. A year ago this variation was negative 12.9%”, informed the Minister at a press conference.

The minister explained that this growth in economic activity was driven by the mining sector, which expanded by 52.4%; construction 32.8%; transport and storage 22.6%; hydrocarbons 14.8%; manufacturing industry 10.7%; electricity, gas and water 9.6%; trade 9.1%, among the most important.

The Minister highlighted the increase in mineral production. Between January and June 2021, compared to the same period in 2020, there was an increase in zinc production of 51%, lead 64%, tin 59%, silver 67% and gold 63%.

The growth of various indicators of the construction sector is also observed, as well as employment in the sector.

In this context of economic reactivation, he also highlighted the increase in electricity consumption, mainly in the industrial sector, with an accumulated variation of around 18%. "This is a good indicator because when industry demands energy it is because it requires this important input for the production of goods and services," he declared.

"The unemployment rate from July 2020, which was 11.6% to July 2021, is now 6.4%, a reduction of 5.1 percentage points," the minister emphasized.

He also highlighted the growth of formal employment by 28% during the last year. “A growth for a similar period, 12 months, of formal employment of 28 percent. This is very important to point out so that it is understood that the recovery of the economy is taking place in many economic activities and with formal employment” he pointed out. Bolivia expects to close the year with economic growth of around 5%. The Bolivian Government planned to close for 2021 with a growth of the Gross Domestic Product (GDP) equal to or greater than 5%, above the 4.4% initially projected, the Minister of Economy and Public Finance, Marcelo Montenegro, previously reported.

According to the authority, in 2022 it is expected to have "a thriving economic activity" driven above all by sectors such as construction, agriculture, manufacturing and the "engine" of the economic model launched by the Government "which is public investment". The minister warned that the stoppage of economic activity due to strikes such as the one currently taking place partially in some Bolivian regions is something "very dangerous for the economy" and its reactivation.

The Bolivian authorities have highlighted the growth of 9.36% in the first half of the year, after the 8.8% drop registered in 2020, a year marked by the covid-19 pandemic. The minister referred to the matter in an appearance called to report on the payment of the second Christmas bonus, which this year will not be made because the 12-month growth, between July 2020 and June 2021, was 1.43%, when a development of more than 4.5% was necessary.

The minister highlighted the "effort" that will be made next year to "increase the productive capacity of the economy". The Government of Luis Arce ratified for 2022 the goal of transforming the productive apparatus with "import substitution and industrialization", as well as the continuity of social policies with income redistribution. It also aims to take care of the sustainability of public finances and guarantee resources for health, education, housing and basic services, among others.

According to the Government, the consolidated budget for the health sector will be equivalent to more than 3,389 million dollars, 10% of the General State Budget Project, some 3,645 million dollars will be allocated to education and some 670 million to defense, and many other areas.

List of sources

1. The World Bank in Bolivia // Bolivia, general context of the economy. 2021.ronic RL: https://www.bancomundial.org/es/country/bolivia/overview#1. (Date of visit: 11.10.2021)

2. Bolivian Economy and Finance // News of the Ministry. – 2021. [Electronic resource]. – URL: https://www.economiayfinanzas.gob.bo/la-economia-boliviana-crece-87-a-junio-de-2021.html. (Date of visit: 31.08.2021)