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.
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.
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.
Once the economy begins to return to normal, as the phases of the pandemic are overcome in the country, it is estimated that the demand for meals outside the home will have decreased by 13%.
Using a demand/income sensitivity model developed by CentralAmericaData's Trade Intelligence Unit, variations in demand by Nicaraguan households for different goods and services can be projected as the most critical phases of the spread of covid-19 are overcome and restrictive measures are lifted in the country.
Once the Central American economies begin to return to normal, as the restriction and quarantine measures that have been taken to prevent the spread of the covid-19 are relaxed, household consumption patterns will have changed significantly.
For example, the demand for meals out of home will decrease by about 7% from the levels reported prior to the crisis.
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.
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.
In its latest update of economic growth projections for 2019, ECLAC estimates that the Dominican Republic will close the year with a 5% increase, followed by Panama, which would reach a growth rate of 3.7%.
According to economic growth projections for Latin America, which were estimated by the Economic Commission for Latin America (ECLAC) and updated in November, the Dominican Republic will be the country in the region that will increase its production the most this year.
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.
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 pessimism expressed by consumers in Costa Rica and the constant deterioration of business expectations in Guatemala reflect part of the complex challenges faced by Central American economies this year.
A report prepared by the School of Statistics of the University of Costa Rica (UCR) shows the negative trend that come showing the economic expectations, because between February 2018 and the same month of 2019, the Consumer Confidence Index (ICC) fell 15%.