Twelve months after Central America began a health and economic crisis triggered by the covid-19 outbreak, Guatemala was the fastest recovering economy and Panamanian economic activity is the slowest to return to pre-pandemic levels.
Monday, March 8, 2021
In March 2020, the first cases of covid-19 began to be detected in the countries of the region. The highly contagious disease, which at that time had already claimed the lives of thousands of people around the world, forced Central American governments to establish mobility restrictions.
Closures of stores, restaurants and borders, restrictions on the movement of vehicles, suspension of passenger transportation, prohibition of shows and mass events, became the new normal for Central American economies.
Starting in the second half of 2020, the countries began the process of de-escalation of domestic quarantine and reopening of the economy. Although few restrictions still apply in the six countries of the region, economic recovery has proceeded at different speeds.
Guatemala was the country that most quickly recovered the dynamism of its economic activity. The latest report from the central bank indicates that after bottoming out in May last year, when production decreased 11% year-on-year, during December 2020 and January 2021, increases of 5% and 3%, respectively, were recorded.
In the case of Nicaragua, an economy in which no production activity was restricted, production decreased 3% during 2020. This decline is because the country's main trading partners faced severe economic crises, a situation that impacted local production levels.
Between December 2019 and the same month of 2020, Costa Rican economic activity contracted 5%, with the commercial and tourism sectors being among the most damaged in this context of health and economic crisis.
El Salvador and Honduras have been among the countries that are taking the longest to recover the dynamism of their economies, since in 2020 production levels decreased 6% and 9%, respectively.
Panama is the economy that shows the most damage, since in May 2020 the drop in economic activity exceeded 31%, and although in the following months production recovered dynamism, as of November of last year the year-on-year variation was -14%.
In January of this year, the Monthly Index of Economic Activity reported a 15% year-on-year drop, which is similar to the behavior recorded from March to December 2020, a period in which the pandemic severely affected productive activities.
This index contracted considerably, due to the effects of the Covid-19 health emergency.
Strengthening the confidence of economic agents through a solution to the problem of public finances and moving forward with the process of vaccinating the population are key factors for the Costa Rican economy to recover quickly in the new year.
The spread of covid-19 and the restrictions imposed at the local and global levels severely affected most of Costa Rica's productive sectors, to the extent that the unemployment rate climbed to historical levels, several businesses were closed and economic activity fell sharply.
Although the end of the year holidays is a threat to Central America for a second wave of covid-19 infections, it is expected that total closures will not be decreed since there are currently effective health control options, and less costly for the economy.
When the first cases of covid-19 were reported in the region in March 2020, most governments decided to paralyze a large part of productive activities and decree home quarantines. These actions focused on containing the advance of the virus caused a severe economic crisis in all countries.
As of June, Central American economies began to show signs of incipient recovery and as of August, Guatemala, Nicaragua and Costa Rica registered the smallest drops in their levels of economic activity.
Since March of this year, the region has faced a severe economic crisis generated by the outbreak of covid-19.
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