Experts are warning that the rapid growth of public spending could have negative implications if conditions change in the economic environment.
After the Ministry of Finance raised the ceiling on the deficit for the nonfinancial public sector to 4.1% at the end of September 2014, there are now significant differences between income and expenses, resulting in a deficit of $2.07 billion.
With the exception of Nicaragua, fiscal deficits are growing in the rest of the isthmus, along with public debt.
From the editorial of Central America's Fiscal Lens No. 6:
Central America faces an economic slowdown during 2013: on the isthmus, all countries project growth rates which are lower than last year. The degree of openness of these small open economies makes them susceptible to changes in the international context.
The Central American Institute for Fiscal Studies has highlighted the unsustainability of the fiscal deficit in Costa Rica, El Salvador, Guatemala and Honduras.
Pensalibre.com reports that "... according to the results of a report by the Central Institute for Fiscal Studies (Icefi) submitted yesterday ... Guatemala, El Salvador, Honduras and Costa Rica find themselves with in unsustainable scenarios regarding public debt in the next few years. "
The deficit of the nonfinancial public sector was 2.1% of GDP at the end of fiscal year 2012, compared with a deficit of 2.2% of GDP in 2011.
A statement from the Ministry of Economy and Finance reads:
The deficit of the nonfinancial public sector (NFPS), was 2.1% of GDP at the end of fiscal year 2012, compared with a deficit of 2.2% of GDP in 2011, total NFPS revenues increased by B /.
The projected deficit in the state budget approved for 2013 is close to the legal limit, and is causing concern in business sectors.
From the Panamanian Association of Business Executives (APEDE):
APEDE concerned about budget deficit in 2013
The Panamanian Association of Business Executives is concerned about the projected budget deficit for 2013, according to figures presented by the Ministry of Finance this week to its membership.
In light of the European crisis and slow growth in the U.S., the best protection for Latin American countries is macroeconomic discipline.
Although it is believed that regional banks are "solid, liquid and stable," the recommendation for Latin America to avoid or at least mitigate the inevitable effects of the economic crisis in Europe and the slow recovery of the U.S., is to keep a lid on fiscal deficit.