Central America Economic Forecast

Economic Snapshot for Central America

May 21, 2020

Growth is seen ebbing slightly  this year as weaker momentum in the Dominican Republic and Puerto Rico seems set to outweigh faster growth in Costa Rica and Panama. Downside risks stem from a potential faster-than-expected U.S. slowdown; social tensions in countries such as Haiti, Honduras and Nicaragua ; and a vulnerability to natural disasters.

Central America Monetary & Financial Sector News

Regional inflation increased from 2.1% in November to 2.4% in December on higher price pressures in the Dominican Republic and Guatemala. Inflation is seen rising somewhat this year  on accommodative monetary stances and currency depreciation.

In recent weeks, the central banks of Costa Rica and Honduras cut rates to support economic activity against a backdrop of mild inflation. The other remaining central banks with independent monetary policies stayed put. This year, regional interest rates are seen staying close to current historically low levels as banks aim to boost moderate growth .

Over the last month, the Costa Rican colón appreciated somewhat, while the Dominican peso lost some ground  and the Guatemalan quetzal was stable. This year, currencies should depreciate on persistent fiscal and current account deficits, in addition to political instability in some countries.

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Central America Economic News

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