Central America Fiscal Outlook

With the exception of improvements in Nicaragua and Honduras, in the rest of the Central American countries problems in public finances range from latent in Panama and already serious in Guatemala, to critical in Costa Rica and El Salvador.

Thursday, July 30, 2015

From the report "Macrofiscal Profiles: 4th Edition" by the Central American Institute for Fiscal Studies (Icefi):

The first months of 2015 have been extremely difficult for the finances of most of the countries in Central America, particularly because of the structural problems they face and which, in many cases, have been overlooked by the government of the day. However, and even though each case must be analyzed separately, the general features suggest that the ultimate goal of each Central American country has been to ensure fiscal sustainability in each country by controlling the levels of fiscal deficit and total indebtedness.

To advance the analysis of Central America's financial situation, it is convenient to group the nations of the region together, in order to be able to understand the different directions that each of them has followed. In first place are the countries whose budgetary outcomes are relatively manageable and which have even shown an improvement with respect to the pattern observed in previous years.

In this group is Honduras, with its implementation of the tax reform of 2014 and a significant austerity policy, especially on issues related to wages and salaries of workers in the centrally managed administration, having reduced the level of the fiscal deficit from the previous year and maintained a strong track record this year, to the extent that the information available at the time of press shows a budget surplus of 0.2% of gross domestic product (GDP) and a reduction of debt to GDP from 45.6% to 42.5%.

Read the full report here (spanish).



More on this topic

The Unstoppable Public Debt

September 2018

"Public debt in terms of simple average for the Central American region will continue growing, reaching 43.1% of GDP in 2018, after having registered 42.5% in 2017."

The Central American Institute of Fiscal Studies (Icefi) estimates that for the current year the size of public expenditure of the Central Government in relation to the respective Gross Domestic Product of each country will be 21.4% in Costa Rica, 20.4% in El Salvador, 20% in Honduras, 18.4% in Nicaragua, 17.6% in Panama and 12.1% in Guatemala.

Panama: The Monkey Dressed in Silk

June 2017

Presenting a fiscal balance as a success while continuing to increase public debt is to disguise the fact that the government is still spending more than it collects.

"Even if a monkey dresses in silk, it is still a monkey"

EDITORIAL

Sustainability of Public Debt in Central America

June 2013

The Central American Institute for Fiscal Studies has concluded that only the public debts of Panama and Nicaragua, using official data, are sustainable in the medium term.

The main theme of the fifth edition of the 'Lente Fiscal Centroamericano' (Central American Fiscal Lens) is an analysis of debt sustainability in Central America, which depends greatly on interest payments on debt, economic growth, inflation, revaluation and management of the fiscal deficit.

Clouds Over Costa Rica in 2012

January 2012

The country's economy, which has not yet recovered from the crisis of 2008, will suffer from a deficit for which the government can not find effective solutions.

The unbridled growth of government spending in recent years, growth which has only just been moderated, has brought the fiscal deficit to 5% of GDP annually.

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