Growing Fiscal Risks in Central America

The countries facing the greatest risk of fiscal unsustainability within three years are El Salvador and Honduras, followed by Costa Rica and with less risk, Nicaragua and Panama.

Wednesday, August 10, 2016

From the  "Economic Outlook" section of the V Report on the State of the Region 2016:

With the data available on the non-financial public sector in Costa Rica, El Salvador, Nicaragua and Panama, and of the Central Government in the cases of Guatemala and Honduras, debt sustainability based on the model developed by Deshon (2013) was analyzed.

With the time horizon of the year 2019, it was determined what conditions the countries will be in if: 

• the baseline scenario of public financing conditions is maintained as well as growth according to the projections for World Economic Outlook given by the IMF (2014, October), 
• there is an increase in the interest rate equivalent to one standard deviation of the average occurring in the 2010-2013 period, 
• tax revenues fall to the minimum level for the period 2010-2013, based on the baseline scenario, and 
• spending increases to the maximum observed between 2010 and 2013.  

Read full chapter "Panorama Económico" from Programa Estado de la Nación, V Informe Estado de la Región 2016. ( in spanish)

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