According to the IMF, the local economy is well positioned to support the recovery and overcome the deterioration of social indicators, which worsened due to the pandemic caused by the Covid-19 outbreak.
Strong remittances, pandemic-resilient productive specialization, and unprecedented economic policy support limited economic contraction in 2020, while the outlook for 2021 benefits from additional U.S. fiscal stimulus, the International Monetary Fund (IMF) reported.
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.
Arguing that the measures applied by the government directly harm employees and owners of restaurants and bars, a group of businessmen in Guatemala filed a legal action in the Constitutional Court.
Restrictions to productive activity have already been applied for days, since with the purpose of promoting actions aimed at interrupting the epidemiological chain of the Covid-19 disease, on April 17 Ministerial Agreement 87-2021 was published in the Diario de Centroamerica, a regulatory framework that requires a 25% reduction in the capacity of shopping centers, shopping malls, convenience stores and restaurants.
As a result of the restrictions imposed by the Guatemalan Government, local businessmen estimate that sales in the commercial sector last weekend fell by up to 50% and the number of customers in restaurants and shopping centers decreased considerably.
In order to promote actions aimed at interrupting the epidemiological chain of the Covid-19 disease, Ministerial Agreement 87-2021 was published on April 17 in the Diario de Centroamerica, a regulatory framework that requires a 25% reduction in the capacity of shopping malls, commercial centers, convenience stores and restaurants.
The World Bank predicts that by the end of this year Panama and the Dominican Republic will be the economies of the region that will grow the most, and the countries that will report the lowest increases in their production will be Costa Rica and Nicaragua.
After the region's economies were considerably affected in 2020 by the sanitary crisis generated by the Covid-19 outbreak, the outlook of international organizations for 2021 is encouraging.
As a result of the economic crisis generated by the pandemic, it is estimated that four out of every five Central American companies were forced to increase their debts in order to sustain their operations.
According to the 2021 Regional Survey on economic reactivation prepared by the Federation of Chambers of Commerce of the Central American Isthmus (Fecamco), the resources obtained through indebtedness, served the companies to pay payroll, face rents and support operations.
Twelve months after Central America began a health and economic crisis triggered by the covid-19 outbreak, Guatemala was the fastest recovering economy and Panamanian economic activity is the slowest to return to pre-pandemic levels.
In March 2020, the first cases of covid-19 began to be detected in the countries of the region. The highly contagious disease, which at that time had already claimed the lives of thousands of people around the world, forced Central American governments to establish mobility restrictions.
During January of this year, the Monthly Index of Economic Activity reported a 3.2% increase compared to the level reported in the same month of 2020.
The Guatemalan economy continues to show positive signs, since after facing a crisis during 2020 due to the covid-19 outbreak, economic activity has recovered quickly in recent months.
Regarding what is expected economically for 2021, in Nicaragua, El Salvador, Panama and Honduras there is more optimism among consumers, while in Guatemala and Costa Rica the percentage of people who believe that the situation will improve this year is lower.
According to the survey conducted by Kantar to measure the perception of households in Central America, at regional level 12% of consumers consulted believe that the economic situation in their country will improve during 2021, 23% expect it to be the same and 65% predict that it will be worse.
In order to mitigate the spread of covid-19, as of January 26, shopping centers and malls, supermarkets, convenience stores and neighborhood stores, will be allowed to carry out their activities until 7:00 pm.
The January 26 edition of the Diario de Centroamerica published the Ministerial Agreement 08-2021 of the Ministry of Public Health, which details the restrictions imposed, which aim to mitigate the escalation of the number of cases of covid-19.
Strengthening trade between the US and the region, fighting corruption in the Northern Triangle and reducing illegal migration flows, are some of the axes on which Joe Biden, the US president who has been sworn in, is expected to focus.
Biden, representative of the Democratic Party and winner of the last US elections, whose results were close, arrives at the White House to replace Donald Trump.
The agile execution of economic stimulus programs, the considerable increase in public debt and the need to accelerate the process of economic reactivation are the lights, shadows and challenges identified a year after Alejandro Giammattei took office as president of Guatemala.
The World Bank has improved economic growth projections for all Central American economies for 2021, with Honduras, El Salvador and Panama having the most promising forecasts.
In June 2020, when the health and economic effects of the pandemic that caused the covid-19 outbreak were beginning to be reported, the World Bank predicted that in 2021 Nicaragua's Gross Domestic Product would decrease by -1.6%, but in a January 2021 publication it projected that the drop would be -0.9%.
Because of the fall in economic activity and the restrictions imposed to contain the spread of covid-19, businessmen in Costa Rica and Panama predict that the process of economic recovery will not be completed in the near future.
In this crisis scenario generated by the covid-19 outbreak, the Costa Rican economy does not show clear signs of recovery, since during November 2020 the Monthly Index of Economic Activity reported a year-on-year fall of 6.2%, a decline similar to that reported in October, when it was 6.3%.
Although forecasts at the start of the pandemic were pessimistic, during 2020 the country received remittances of $11.34 billion, an amount that is 8% higher than the $10.58 billion recorded in 2019.
According to the most recent report from the Bank of Guatemala, only in December, remittances amounted to $1.164 billion, 24% more than those reported in the same month in 2019, when the figure was $941 million.
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