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.
After the political crisis the country went through in 2018 and the health crisis it faced in 2020, businessmen maintain hopes that tourism activities will recover in 2021 and in the following years return to the path of growth.
The Nicaraguan tourism sector has been rained on over the past three years. In April 2018, companies engaged in these activities began to experience a crisis, as a political and social crisis occurred in the country, which ended up affecting the productive activity.
In the context of the health crisis generated by the outbreak of covid-19, businessmen of the sector foresee that at the end of 2020 the tourism industry will add revenues of about $176 million, an amount that would be 66% less than that reported in 2019.
The estimates of the National Chamber of Tourism of Nicaragua (Canatur), are more pessimistic than the projections of the Nicaraguan Institute of Tourism (Intur), since according to the business association the income will amount to $176 million and according to the government institution it will add $216 million at the end of the year.
Since the beginning of the political crisis in 2018, the activity began to decline, the trend continued in 2019 and by 2020 the expectation is that the fall in investments in the sector will be more acute, mainly private ones.
Official data indicates that between 2017 and 2018 investment in private construction projects decreased by 17%, from $1,106 million to $914 million.
According to IMF forecasts, Panama and El Salvador are the economies that in 2020 will report the worst falls in their production, while Guatemala would be the country in the region that would emerge best from this economic and health crisis.
Due to the severe economic crisis generated by the covid-19 outbreak, the economic growth projections calculated by international organizations are not at all encouraging for Central America.
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.
Although the sector keeps its operations alive thanks to the packaging they produce for the food and cleaning industry, there is uncertainty among entrepreneurs as the demand for bags, brushes, tableware, furniture and other products has contracted.
As a result of the home quarantines that were decreed in the countries of the region in March 2020 due to covid-19, the outlook for the plastics industry fluctuates between optimism and uncertainty in market behavior.
In Central America, it is estimated that the sectors that could expect a severe impact on sales in the coming months are Transport, Entertainment and some sub-sectors of Industry and Trade.
The "Information system for the Covid-19 Impact Analysis on Business", prepared by the Trade Intelligence Unit of CentralAmericaData, measures the degree of impact that the crisis will have on companies according to their sector, during the coming months.
After production in Nicaragua fell 3.8% in 2018, the IMF estimates that during 2019 the GDP will contract by 5.7%, however, the agency predicts that by 2020 the variation could be only -1.2%.
Real GDP is estimated to have contracted by another 5.7% in 2019 due to the deterioration in aggregate demand, fiscal consolidation and sanctions, the IMF reported after its visit to the country.
According to Fitch Ratings, banks in Nicaragua will continue to be pressured by the remaining effects of an economic contraction for the second consecutive year, a situation derived from the political crisis affecting the country.
Although the economic and political crisis has hit several productive activities in Nicaragua, the dairy sector plans to close 2019 with a 5% increase in sales abroad.
In addition to the crisis that has affected Nicaragua since April 2018, businessmen in the sector identify as obstacles to the growth of their income the commercial obstacles that persist in Honduras and El Salvador, the entry into force of the tax reform and the constant increases in electricity tariffs.
After having recorded a 4% fall in GDP in 2018, the Central Bank authorities forecast that the Nicaraguan economy will begin to recover in the 2020-2021 period.
Faced with the threat of a global economic slowdown and the possibility of the U.S. entering recession next year, businessmen in the region argue that to mitigate possible adverse effects, it is key to diversify export destinations.
Market analysts assure that the slowdown in U.S. economic activity is already a reality, and that what is still not clear, is the possibility that the economy will go into recession next year.
If the country does not provide an early solution to the socio-political crisis it has been going through since April 2018, it is projected that the economy could decline between 7% and 11% during 2019.
The Nicaraguan Foundation for Economic and Social Development (Funides), presented the "Informe de Coyuntura" (Situation Report), which explains that if the socio-political crisis continues this year there will be a greater fall in the economy compared to the 4% reported in 2018.
The exporters' guild estimates that the new year will be difficult for the country's economy, since there are multiple factors that threaten the growth of foreign sales.
The Association of Producers and Exporters of Nicaragua (APEN) reported that the expectation of year-on-year increase in export revenue for 2018 ranged between 6% and 10%, however, there was a 1% decrease.