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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More on this topic

Economic Recovery: Honduras Retreats

January 2021

As a result of the pandemic in May 2020, the IMAE hit bottom by falling 22% year-on-year, but from June onwards, smaller falls began to be reported and in October the decline was barely 1%; however, in November the country fell back by 12%.

National production, measured through the original series of the Monthly Index of Economic Activity (IMAE), reflected a 12% year-on-year decrease in November 2020, determined by the negative impact of the pandemic, to which was added the losses in production due to the flooding caused in the national territory in the first half of November by the occurrence of tropical storms Eta and Iota.

Economy in 2021: How to Accelerate Recovery?

January 2021

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.

Economic Activity Still Recovering

September 2020

After the IMAE in Guatemala registered a -11% year-on-year variation in May of this year, during June and July the production contractions were lower, reporting falls of 7% and 5%, in that order.

The Bank of Guatemala reported that in the current economic crisis that emerged due to the spread of covid-19, the activities that have most boosted the drop in production are trade, tourism and transportation.

Economic Growth: Optimism at the End of 2020

August 2020

Variations indicating a certain improvement in the world economy, the reopening of different markets and the recovery of exports are some of the factors that could influence Guatemala's economic activity to decrease less than expected in 2020.

In this context of economic crisis resulting from the outbreak of covid-19, the Economic Commission for Latin America and the Caribbean (ECLAC) predicted in April that the Guatemalan economy would fall by 1.3% at the end of 2020. According to the projections updated in July, the contraction of the Gross Domestic Product would be worse, as the forecast was for a -4.1% variation.

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