Reducing costs and barriers to foreign trade in Central American economies is key for the region to overcome the economic recession caused by the outbreak of Covid-19.
A report prepared by the World Bank explains that boosting economic activity and employing a higher percentage of the labor force are objectives that can be achieved through reforms that strengthen the private sector and attract investment.
The next U.S. president is not yet known, but in the region it is expected that in an eventual new Trump administration, the focus will be on the recovery of the U.S. economy, while an eventual Biden administration would focus on countering corruption and illegal migration.
Two days after Election Day took place, the United States is experiencing an atmosphere of tension and uncertainty, since because the results are closed, neither candidate can yet be declared the winner.
After the unemployment rate in the United States fell from 15% to 8% between April and August, it became evident that at the beginning of the crisis the capacity of recovery that the North American country could develop was underestimated and it is expected that this behavior could boost the economic activity in Central America.
During the first half of 2020, when the first cases of covid-19 began to be reported in the region, forecasts noted that the recovery of economic activity would be excessively slow, due to a significant drop in consumption globally.
The World Bank projects that the Central American economy will contract by 3.6% this year, due to restrictions on movement, a decline in remittances and tourism, and a drop in agricultural prices.
The sudden and widespread impact of the coronavirus pandemic and the measures taken to contain it have caused a drastic contraction in the global economy, which, according to World Bank forecasts, will shrink by 5.2% this year, the bank reported on June 8.
According to the IMF, Honduras has experienced a moderation in economic growth in recent quarters, but a recovery is expected next year.
Honduras has made significant progress in implementing its economic program, which aims to foster inclusive growth through prudent macroeconomic policies and structural and governance reforms, according to the international organization's report.
The region is expected to conclude 2018 with a rise of just over 4% in the volume exported and just 3.6% in value, due to the fall in international prices of several agricultural products.
According to the International Trade Outlook for Latin America and the Caribbean 2018, published by the Economic Commission for Latin America and the Caribbean (ECLAC), it is expected that this year Central America will export larger volumes at lower prices.
This year it is projected that growth in the Honduran economy will moderate to 3.7%, partly influenced by political uncertainty and less favorable external conditions.
From a statement issued by the IMF:
An International Monetary Fund (IMF) mission, led by Roberto Garcia-Saltos, visited Tegucigalpa during April 3-12 to conduct the 2018 Article IV consultation.
The Central Bank projects that the Honduran economy will grow between 3.8% and 4.2% this year, and that inflation will remain in the range of between 3% and 5%.
The Central Bank details in its report that "...According to projections for the world and national economy, the BC's forecasts indicate that domestic inflation for 2018-2019 will be within the tolerance range of 4.0% ± 1.0 pp."
The Central Bank has reported that in the third quarter of the year the Gross Domestic Product registered an interannual increase of 6.5%, mainly explained by the manufacturing industry and the agricultural sector.
From the quarterly report by the Central Bank:
DURING THE III QUARTER OF 2017 ECONOMIC ACTIVITY CONTINUED REGISTERING DYNAMISM HAVING GROWN 2.0%
“Structural reforms are critical to promote private investment and create jobs. Continuing to pursue reforms in the electricity sector, improving the efficiency of public spending, reducing corruption, closing the infrastructure gap, and working together in alliance with the private sector are critical for a sustained economic expansion with marked poverty reduction.”
The entity has raised the forecasts for real GDP growth from 3.5% to 4% for 2017, driven by private consumption, exports and investment.
From a statement issued by the IMF:
An International Monetary Fund (IMF) mission, led by Roberto Garcia-Saltos, visited Tegucigalpa during September 11-14 to conduct the fifth and sixth reviews of Honduras’ Fund-supported program.
In its review of the monetary program, the Central Bank has raised the expected economic growth rate for the biennium 2017-18, from 3.4% - 3.7%, to 3.7% - 4.1%.
From the executive summary of the report "Review of the 2017-18 monetary program" by the Central Bank:
The Board of Directors of the Central Bank of Honduras (BCH), in fulfillment of its powers, presents the Monetary Program (MP) Review 2017-2018 published in March of this year. This document contains an update of the macroeconomic framework for the aforementioned biennium, adapting it to thefirst half of year of the international and domestic economy, as well as to the latest perspectives on the world economy.
The activities of Electricity and Water Distribution and Financial Intermediation were those that accounted for most of the growth in gross domestic product in 2016.
From a report by the Central Bank:
Quarterly Gross Domestic Product (PIBT) at constant prices, in the seasonally adjusted series, increased by 1.8% compared to the previous quarter; reflecting an acceleration in the production of goods and services in relation to all of the previous quarters of that year.