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.
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.
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.
Costa Rican businessmen propose that given the economic crisis and the new normality that the country will face, the government should promote key strategies such as the sale of state assets, the transformation of public employment and the elimination of privileges in terms of pensions and salaries.
The Union of Chambers and Associations of the Private Business Sector (UCCAEP) presented to President Carlos Alvarado a document called "Pandemic Shock and Economic and Social Policies to Mitigate its Effects", which seeks to provide a way out of the health and economic crisis resulting from the outbreak of covid-19.
"Growth remains susceptible to adverse shocks to global growth, economic and socio-political stress in Nicaragua, the continued weakness in consumer and business confidence, and uncertainty regarding the implementation of the fiscal reform.”
After the slowdown in growth between 2017 and early 2019, the economy has recovered since mid-2019, as a result of a rebound in services, agriculture and manufacturing, which produced an estimated 2.1% growth in 2019, reported the International Monetary Fund (IMF).
The effects of the reduction in the Monetary Policy Rate and the lowering to 12% of the minimum legal reserve for banks will take months to be perceived, and without other parallel actions that impact the business sector more quickly and effectively, the economic reactivation of Costa Rica will not be possible in the short term.
According to the latest report of the Central Bank of Costa Rica (BCCR), when comparing the level of economic activity recorded in March this year with the same month of 2018, it is observed that most economic activities slow down their growth, which was reflected in the slowdown of the general indicator. See full report.
The Central Bank estimates that Costa Rica's economy will increase by 3.2%, mainly because of private consumption and a rebound in public investment.
According to the Central Bank's 2019-2020 Macroeconomic Program, the Costa Rican economy will increase by 3.2% in 2019 and by 3% in 2020.
The authorities consider that economic growth in 2019 will be boosted by private consumption, reflecting the increase in confidence after the approval of the fiscal reform and the impact of the improvement in the terms of trade on disposable income, and by government consumption (recovery effect after the strike).
During the new year, the main challenge for Costa Rica's economy will be to increase above 3%, given that 2018 was marked by a context of fiscal uncertainty and economic slowdown.
According to the Central Bank of Costa Rica, economic growth, measured by the year-on-year variation of the trend cycle of gross domestic product (GDP), slowed last year, and recorded to the third quarter a 2.1% rate (3.2% in the same period of 2017 and 2.8% as the average rate of the two previous quarters).
Businessmen in Costa Rica ask the government to complete projects that promote the reactivation of the economy next year, where construction and agriculture are the highest priority activities.
In addition to the economic rebound, the Costa Rican Union of Chambers and Associations of Private Business Sector (UCCAEP) expects the country not to focus on single-issue discussions, as happened in 2018 with the fiscal plan.
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