Which Economies Have Recovered the Most?

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.

Wednesday, October 28, 2020

Central America: Economic Activity by Country Al August 31st, 2020  


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Since March of this year, the region has faced a severe economic crisis generated by the outbreak of covid-19. The strict quarantines decreed, the closure of borders and commercial establishments, ended up damaging the dynamism of productive activities.

Official figures show that May was the month in which most economies bottomed out, as economic activity in Panama fell 41% year-on-year, in Honduras 22%, in El Salvador 21%, in Guatemala 11%, in Costa Rica 10% and in Nicaragua 8%.
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From June to August an incipient recovery process began to be reported in several countries, being the Guatemalan economy the one that reports the best figures.

In Guatemala, in the eighth month of the year, the contraction of the Monthly Index of Economic Activity (IMAE) was only 1.8%, which is explained by the better performance observed in the manufacturing industries and in agriculture, livestock, forestry and fishing.

As of August, Nicaraguan economic activity contracted by 3.6%, with Agriculture, Mining and Quarrying, Commerce and Construction being the sectors that explained the improvement in production.

In the case of Costa Rica, between July and August there was a slight improvement, as the year-on-year variation of the IMAE went from -9.2% to -7.9%. This behavior is partly explained by the fact that information and communication services increased their exportable production from companies located in the free zone regime.

The Honduran economy has taken solid steps towards the recovery of its production levels. Official data highlights that between May and August it went from reporting a year-on-year variation -22% in its IMAE to -8%, this behavior is explained by the partial recovery in the textile manufacturing industry, commerce and other community, social and personal service activities.

El Salvador is another economy that has recovered quickly, going from a 21% contraction in May to a 9.4% decline in August. The agility with which productive activity has been reactivated is due to a judicial ruling that has speeded up the process of reopening the economy in the country.

In the case of Panama, the official figures have not been updated and the data is only known as of May.

Regarding the forecasts for this year, the IMF estimates that the economies of Panama and El Salvador will fall 9% by the end of 2020. In Honduras, the contraction of economic activity would amount to 6.6%. The agency forecasts that the economies of Costa Rica and Nicaragua will contract 5.5%, in both cases. Guatemala would be the country that would best emerge from this crisis scenario, as its production would vary by only -2%.

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