Following the IMF assessment, the country's macroeconomic conditions are expected to remain strong and growth is expected to be solid in coming years.
Monday, November 19, 2018
From the International Monetary Fund statement:
November 16th, 2018. An International Monetary Fund (IMF) team led by Esteban Vesperoni visited Tegucigalpa from November 12-16 to assess recent economic developments since the completion of the 2018 Article IV consultation in May and the medium-term outlook. At the end of the visit, Mr. Vesperoni issued the following statement:
“Macroeconomic conditions have remained stable and growth is expected to be resilient over the next years. After rapid growth in 2017, economic activity is expected to reach 3½ percent this year, close to its trend. On the back of higher world oil prices, annual inflation reached 4.7 percent in end-October, within the 4±1 percent central bank target range. The current account deficit is projected at 3¼ percent of GDP in 2018, amid declining terms of trade due to lower coffee prices and higher oil prices. Buoyant activity in the U.S. and prudent macroeconomic policies will support growth in coming years.
“The fiscal position continues to be anchored by the Fiscal Responsibility Law, including through measures to contain the financial situation in the public electricity company. The Nonfinancial Public-Sector deficit is expected to stay within the law’s ceiling of 1.2 percent of GDP in 2018.
“The mission and the authorities have agreed to continue engagement towards negotiations for an economic program that could be supported by a financial arrangement with the IMF.
“The mission held discussions with Central Bank Governor and Head of the Economic Cabinet Wilfredo Cerrato, Minister of Finance Rocío Tábora, Minister Director of the Tax Agency Miriam Guzmán, commissioner of the National Commission of Banking and Insurance Adonis Lavaire and other senior officials and representatives of the private sector. The mission wishes to thank the authorities for their hospitality and all stakeholders for the candid dialogue.”
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"Growth remains susceptible to adverse shocks to global growth, economic and socio-political stress in Nicaragua, the continued weakness in consumer and business confidence, and uncertainty regarding the implementation of the fiscal reform.”
After the slowdown in growth between 2017 and early 2019, the economy has recovered since mid-2019, as a result of a rebound in services, agriculture and manufacturing, which produced an estimated 2.1% growth in 2019, reported the International Monetary Fund (IMF).
The entity and the Honduran government agreed to "a combined credit facility of Special Drawing Rights and 24-month Extended Credit Service, for $311 million."
For the country's business sector, the agreement between the International Monetary Fund and Honduras "represents a commitment by the government to maintain macroeconomic stability, a fundamental pillar that favors the country's competitiveness and creates the minimum conditions for the promotion of investment. See "Cohep Expects IMF Agreement to Maintain Macroeconomic Stability".
Due to the recent strike in the construction sector, the entity has reduced projections of economic growth for this year from 5.6% to 4.6%.
However, recovery from the impact of the strike and the entry into operation of a large copper mine will lead to an upward revision of around one percentage point in the growth projection of 5.8% for 2019.
The favorable conditions in the global economy allowed the country to grow by 4.25% in 2016, and administrative efforts to reduce the fiscal deficit were noted, however they will not prevent the debt /GDP ratio from growing.
From a press release by the IMF:
Costa Rica’s economy growing robustly, GDP expected to growth by 4.25% in 2016
More needs to be done to stabilize public debt levels
Key for government and Congress to reach consensus on VAT and income tax reforms proposals to help address fiscal imbalances
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