Final quarter of 2024 sees best GDP growth reading since Q2 2022

Q4 2024 records the highest GDP growth since Q2 2022: GDP grew 4.5% year on year in Q4 2024 (Q3: +3.5% yoy), marking the highest reading since Q2 2022. The acceleration was due to a broad-based improvement in domestic activity. In 2024 as a whole, economic activity expanded 3.7%, up from the 3.5% rise seen in 2023 and slightly above the Central America and the Caribbean average of 3.3% growth.

Broad-based improvement supports growth: Domestically, private consumption growth accelerated to 6.2% year-on-year in Q4, from 4.8% in Q3, and public spending growth picked up to 8.9% (Q3: +1.9% yoy). High levels of remittances likely spurred private consumption, as fears of what the Trump administration presidency would entail regarding immigration boosted flows, while the government increased spending in anticipation of waves of nationals returning. Moreover, fixed investment growth sped up to 7.3% in Q4, following a 3.8% increase in the prior quarter. On the external front, exports of goods and services increased 5.1% in Q4 (Q3: +3.4% yoy). Imports of goods and services growth also picked up in Q4, rising to 10.9% from Q3’s 6.4%.

Economic growth to persist despite strong reliance on U.S. exports and remittances: Our Consensus sees annual GDP growth slowing slightly in the coming quarters. That said, full-year growth is set to remain above the regional average in 2025 as a whole; an acceleration in public spending and exports is set to partially offset softer growth in private consumption as the U.S.’ crackdown on immigration caps remittances—which make up roughly one-fifth of GDP. More restrictive U.S. immigration, trade and foreign aid policy poses a downward risk to GDP growth. However, upside risks to growth include increased government spending and investment to support deportees.

Panelist insight: EIU analysts said: “We expect economic growth to decelerate to 3.4% in 2025, from an estimated 3.7% in 2024 […]. We forecast similar growth rates in the medium term, owing to the introduction of protectionist measures under the Trump administration, which would hinder FDI inflows and curb export growth. Tighter immigration controls and a weaker US labour market will slow the pace of remittances growth, weighing on private consumption in 2025-29. Downside risks are high, as the Trump administration could be more aggressive than we expect, driving growth down further.”

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