Business Partners and Economic Recovery

After the unemployment rate in the United States fell from 15% to 8% between April and August, it became evident that at the beginning of the crisis the capacity of recovery that the North American country could develop was underestimated and it is expected that this behavior could boost the economic activity in Central America.

Monday, September 14, 2020

During the first half of 2020, when the first cases of covid-19 began to be reported in the region, forecasts noted that the recovery of economic activity would be excessively slow, due to a significant drop in consumption globally.
 
However, expectations have begun to vary and investment strategy specialists say that in the case of the U.S. economy, a market on which a large number of Central American products depend, it could accelerate its recovery.

Check out the "System for monitoring markets and economic situation in Central American countries", developed by CentralAmericaData.

Franco Uccelli, executive director and head of Client Investment Strategy for Latin America of J.P. Morgan, explains that "... initially it was expected that the economic recovery in countries like the United States would be U-shaped, after a contraction of 4.2% estimated for 2020, but 'now the evidence shows that perhaps we underestimated the capacity for recovery, and now there is talk that it will probably be V-shaped."

According to the forecast, by 2020 Latin America will contract its production by 8.2%, but for the specific case of Central America the projections are more encouraging, since it is estimated that economic activity will decrease by 4.4%.

Uccelli told Prensalibre.com that "... In the United States a few months ago unemployment was at 15% and now it is less than 8.5%. As labor market conditions continue to improve in that country and the unemployment level continues to fall, remittance flows to Guatemala, El Salvador and Honduras will be consolidated."

The remittances sent from the U.S. to the countries of the Northern Triangle of Central America greatly boost local consumption and activate several sectors of the economy.

The United States is one of the most important commercial partners for Central American companies. CentralAmericaData reports that in 2019 regional exports to the U.S. market exceeded $10.8 billion, an amount 5% higher than that recorded in 2018.

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More on this topic

Economic Growth: Optimism at the End of 2020

August 2020

Variations indicating a certain improvement in the world economy, the reopening of different markets and the recovery of exports are some of the factors that could influence Guatemala's economic activity to decrease less than expected in 2020.

In this context of economic crisis resulting from the outbreak of covid-19, the Economic Commission for Latin America and the Caribbean (ECLAC) predicted in April that the Guatemalan economy would fall by 1.3% at the end of 2020. According to the projections updated in July, the contraction of the Gross Domestic Product would be worse, as the forecast was for a -4.1% variation.

Industry: Forecast for Guatemala

August 2020

After the industrial activity registered in May one of the lowest levels of the last years, it is expected that the sector will close 2020 in negative variations, but more moderate than those reported in the first half of the year.

The Index of Economic Activity of the Chamber of Industry of Guatemala, which is calculated by Central American Business Intelligence (Cabi), states that during May and in the context of the economic crisis resulting from the outbreak of covid-19, fell by about 10% when compared to the same period in 2019.

Guatemala: Household Expenditure Forecast

April 2020

Once the local economy begins to return to normal, as isolation and mobility restrictions are relaxed, it is estimated that Guatemalan households will have reduced their demand for car insurance by 7%.

Using a demand/income sensitivity model developed by the Trade Intelligence Unit of CentralAmericaData, it is possible to forecast the variations in demand by Guatemalan households for different goods and services as the most critical phases of the spread of the covid-19 are overcome and the measures restricting mobility in the country are lifted.

Nicaragua: Consumption Outlook

April 2020

Once the economy begins to return to normal, as the phases of the pandemic are overcome in the country, it is estimated that the demand for meals outside the home will have decreased by 13%.

Using a demand/income sensitivity model developed by CentralAmericaData's Trade Intelligence Unit, variations in demand by Nicaraguan households for different goods and services can be projected as the most critical phases of the spread of covid-19 are overcome and restrictive measures are lifted in the country.

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