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.
Nicaraguan businessmen believe that electoral reform is essential to reactivate the country's economic activity, which has been in decline since the crisis erupted in 2018.
According to estimates by the International Monetary Fund (IMF), Nicaragua's Gross Domestic Product contracted by 5.7% in 2019, a drop that complements the year-on-year variation of -3.8% recorded in 2018.
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.
The outlook for some economies in the region for 2019 is not the best: in Nicaragua GDP is expected to fall between 5% and 7%, while in Costa Rica the growth estimate at the end of the year was reduced from 3.2% to 2.2%.
The estimates of the Nicaraguan Foundation for Economic and Social Development (Funides), presented in its "Informe de Coyuntura - Julio 2019", indicate that by 2019 an economic contraction of between 5.4% and 6.8% will be reported in the country.
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.
New World Bank projections estimate that because of Nicaragua's political crisis, the country's GDP will fall 4% this year and 1% in 2019.
According to the expectations of the international organization, Nicaragua will be the only economy that will decrease in Central America, because of the political and social crisis in which the country is involved since last April, it is expected that the Gross Domestic Product (GDP) will decrease 3.8% in 2018 compared to 2017.
Due to the crisis that has been unfolding in the country since April, the ECLAC has reduced its growth projection for the Nicaraguan economy from 5% to 0.5% this year.
Laprensa.com.ni reports that "...Before the crisis, the ECLAC placed Nicaragua among the fiveLatin Americaneconomieswith the highest growth for this year, with an expansion of GDP of 5% after having grown 4.9% in 2017."
The Central Bank has reviewed its projections in the current complicated context, and expects an economic growth rate between 0.5% and 1.5%, and an inflationary rhythm in the range of 6.5% to 8.5%.
According to authorities at the Central Bank of Nicaragua, the "... new projection of economic growth for the year 2018 is between 0.5 percent and 1.5 percent. On the other hand, inflation is estimated between 6.5 and 8.5 percent.In relation to labor, a loss of 85,100 jobs is projected, which is equivalent to a rate of around 6 percent."
In the optimistic scenario, which foresees an end to the crisis in Nicaragua by the end of July, economic growth at the end of 2018 would be only 1.7%, with $400 million losses in added value.
The Nicaraguan Foundation for Economic and Social Development projects that a possible first scenario would be one where "...the government accepts an early exit negotiated and implemented no later than the end of July, thus achieving a framework of understanding focused on the issues of justice and democratization, putting an end to repression, violence and citizen insecurity."
Due to the crisis in the country, the Central Bank has reduced the estimate of economic growth for this year from the range of 4.5% to 5%, to the range of 3% to 3.5%.
Ovidio Reyes, president of the Central Bank of Nicaragua (BCN), explained that "... the hardest and most regrettable thing about this is the generation of employment.We are expecting the loss of 58,300 new jobs as a result of the lower economic dynamics."
Economic growth in 2017 exceeded expectations, and although the outlook for 2018 is optimistic, the entity points out that there is a need to reduce tax expenditure and rationalize subsidies.
From a statement issued by the IMF:
Economic performance in 2017 was above expectations and the 2018 outlook is favorable. To minimize downside risks, Nicaragua needs to further fortify its policy framework by (i) hastening the implementation of the international taxation law, reducing tax expenditures, rationalizing subsidies, and implementing a comprehensive reform of the Social Security, (ii) enhancing the supervisory perimeter, (iii) reinforcing the AML/CFT framework, and (iv) building financial buffers and further increasing international reserves.