Central America Economic Forecast

Economic Snapshot for Central America

March 17, 2020

Growth in the regional economy is expected to ease this year on weaker activity in the Dominican Republic, Guatemala and Puerto Rico. The balance of risks to the regional outlook, moreover, is skewed to the downside amid social tensions, vulnerability to natural disasters, softer growth in U.S. and the coronavirus, which will hit exports and tourism.

Central America Monetary & Financial Sector News

Inflation is expected to have moderated from 2.4% in January to 2.2% in February based on preliminary data. Price pressures softened in the Dominican Republic, Guatemala and Honduras, while inflation rose in Costa Rica. This year, inflation is expected to intensify slightly as the regional exchange rate depreciates, although the recent plunge in oil prices poses a downside risk.

Regional central banks held their fire in recent weeks despite the global outbreak of coronavirus that has seen many banks across the globe stepping in to shore up economic activity. This year, key banks in the region are seen maintaining loose monetary stances in order to support their economies, and the coronavirus outbreak raises the possibility of rate cuts.

In recent weeks, the Dominican peso, Honduran lempira and Guatemalan quetzal depreciated against the USD, while the currency of Costa Rica strengthened. This year, the regional average exchange rate is seen depreciating amid persistent twin deficits and political instability in some countries, while the coronavirus will provide further downward pressure.

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Central America Economic News

  • Costa Rica: Economic growth hits one-and-a-half-year high in Q4 2019 but outlook worsens

    March 31, 2020

    In the fourth quarter of 2019, the economy grew 3.3% compared to the same quarter a year earlier, up from the revised 2.5% growth reading in the third quarter (previously reported: +2.4% year-on-year) and the fastest reading since Q2 2018. Government consumption surged 10.2% in the fourth quarter compared to the same quarter a year earlier, up from 6.0% growth in Q3 and largely due to a low base effect following public sector strikes in Q4 2018.

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  • Panama: Economic activity inches up in January

    March 20, 2020

    The monthly indicator for economic activity (IMAE, Índice Mensual de Actividad Económica) rose 2.7% year-on-year in January, accelerating from the 2.5% expansion recorded in December.

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  • Guatemala: Banguat lowers interest rate for first time in over two years in March

    March 19, 2020

    At its 19 March emergency meeting, the Monetary Board of the Bank of Guatemala (Banguat) unanimously cut the key interest rate from 2.75% to 2.25%, marking the first rate cut in over two years. The decision to slash the interest rate chiefly reflected efforts to support activity in the face of the Covid-19 pandemic, which is expected to weigh heavily on the global and domestic economy.

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  • Costa Rica: Economic growth holds steady in January

    March 13, 2020

    Annual economic growth in cyclically-adjusted terms held steady at 2.5% in January, unchanged from December’s downwardly revised reading (previously reported: +2.8% year-on-year). January’s result was in part due to a slight acceleration in activity growth in the agriculture sector, which was offset by a heavier decline in the construction sector. In month-on-month terms adjusted for working days, economic activity rose 0.2% in January, as it did in December.

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  • Guatemala: Inflation eases in February

    March 9, 2020

    Consumer prices fell 0.40% month-on-month in February, down from the 0.24% drop in January.

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