After registering a 1.3% year-on-year variation in June, the Monthly Economic Activity Index in July reached 1.5%, which is mainly explained by the performance of the special regimes manufacturing sector.
After the first seven months of the year, average growth stood at 1.5%, while the average rate of the last twelve months was 1.8%, both lower than that recorded in the same period last year, reported the Central Bank of Costa Rica.
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 recent reversal of the U.S. bond curve, which historically has been the signal that warns of a recession in the short term, may not mean the same on this time, say some U.S. brokerage firms.
While in June the production of special regime companies increased 10% with respect to the same month in 2018, companies operating outside those regimes grew just 0.3%.
The Central Bank of Costa Rica (BCCR) reported that the production of special regimes (SR) companies grew 10.2% in June compared to the same month last year, as a result of increased external demand for medical implements, computer and business services.
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.
In Costa Rica, the Monthly Economic Activity Index reported a 1.3% year-on-year increase in May, one of the lowest growth rates reported in recent years, since a similar variation had not been registered since November 2013.
The trend series of the Monthly Index of Economic Activity 1 registered in May 2019 a 1.3% year-on-year growth, which is lower by 2 percentage points (p.p.) to the same month of the previous year and by 0.2 p.p. to the previous month, informed the Central Bank of Costa Rica (BCCR).
For the Central Bank of Costa Rica, the projection of growth in production, which for this year is 3.2%, should be reviewed downward, because of the evolution that has shown the economic activity during the first half.
Considering the shocks that have affected national production so far in 2019, it is likely that this year economic growth will be below the 3.2% projected in the 2019-2020 Macroeconomic Program last January, explains the most recent report of the Central Bank of Costa Rica (BCCR).
In the first quarter of the year, the country's Gross Domestic Product increased 1.8% year-on-year, lower than the 3.3% reported in the same period in 2018, which is partly explained by the fall in the prices of some agricultural export products.
According to the report of the Central Bank of Costa Rica, the slowdown combined external and internal factors, among which stand out:
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.
For the IDB, investment in infrastructure is the most important priority when increasing the probability of improving productivity and reaching higher per capita income levels in the countries of the region.
The Inter-American Development Bank (IDB) published its report "Building Opportunities for Growth in a Challenging World," in which it addresses the benefits of infrastructure investment and its influence on productivity growth in the countries of the region.
Guatemala and El Salvador are the Central American economies that have registered the lowest levels of economic growth, when this is associated with the size of their public sector.
Panama, Nicaragua, Honduras and Costa Rica are the countries that would be obtaining exceptional results in their economic growth from the average expenditure of the region during 2011 to 2018, which could be associated with the investment made in past periods, informed the Central American Institute of Fiscal Studies (Icefi).
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