Reducing the Monetary Policy Rate to 4.5% and temporarily suspending the daily auctions of Bills aimed exclusively at financial institutions are some of the measures taken by the Central Bank of Honduras in response to the spread of the covid-19.
Faced with a domestic and external context of greater uncertainty and volatility, the Central Bank of Honduras (BCH) established a set of monetary policy measures in order to continue flexibilizing financial conditions that allow the private financial system to have liquidity to meet the needs of the population at this time of high demand, the institution reported.
In order to mitigate the effects that will derive from the covid-19 crisis, businessmen of the industrial sector of Guatemala ask the government to adjust the measures in aspects such as banking, credit, labor and tax.
Economic activity will be reduced, which we are already experiencing. Therefore, it is important to take measures at both the health and economic levels to reduce the impact, explains a statement from the Chamber of Industry of Guatemala (CIG).
In Guatemala, the Executive Branch presented a proposal to the Congress to expand the public budget by nearly $940 million, resources that would be used to recover the economy in the face of the unemployment that will be caused by the spread of the covid-19.
The authorities' plan is to save between 20% and 25% in order to allocate these funds to investment in strategic infrastructure such as ports, airports, the subway and viable projects such as the construction of the Transversal del Sur (TVS), a 110-kilometer stretch that would connect the port of Champerico, Retalhuleu, with Puerto Quetzal, on the coastal strip.
According to the IMF, in the first half of the year, the Salvadoran economy increased above the estimated potential, the inflation remained low and the fiscal position was better than expected.
From the International Monetary Fund statement:
An International Monetary Fund (IMF) team, led by Ms. Alina Carare, visited San Salvador from November 12 to 16, 2018 to discuss recent economic and financial developments.
In the view of Fitch Ratings, continued political unrest could undermine investment conditions and economic growth, as well as raise the risks of confidence shocks to the financial system and macroeconomic stability.
From a statement issued by from Fitch Ratings:
Fitch Ratings-New York/San Salvador-17 May 2018: Continuing protests and resulting political violence in Nicaragua heighten risks to political stability and governability, says Fitch Ratings. Continued political unrest could undermine investment conditions and economic growth as well as elevate risks of confidence shocks to the financial system and macro stability.
The IMAE registered an increase of 3.1%, mainly explained by the activities of Financial Intermediation, Insurance and Pension Funds, the manufacturing industry and commerce.
From a statement issued by Banco Central de Honduras:
May 14, 2018.As of March 2018, the Monthly Index of Economic Activity (IMAE), indicator of national production, registered an increase of 3.1% (5.7% in the same period in 2017).By order of contribution, said behavior was driven by the activities of: Financial Intermediation, Insurance and Pension Funds; the Manufacturing industry; Commerce; Mail and Telecommunications; Transportation and Storage; and Construction.
Supported by greater growth in the US economy, better monetary conditions and a moderate boost in government spending, growth should accelerate gradually until it reaches a rate of 3.6% in 2019.
The mission of the International Monetary Fund (IMF) recognizes the macroeconomic stability that has been achieved, but warns of a need to approve a fiscal reform that allows the tax burden to be increased to at least 15% of GDP, and allocate that additional income to public investment, especially in social development, particularly pre-primary education, preventive health care and greater pension coverage.
Economic growth in 2017 exceeded expectations, and although the outlook for 2018 is optimistic, the entity points out that there is a need to reduce tax expenditure and rationalize subsidies.
From a statement issued by the IMF:
Economic performance in 2017 was above expectations and the 2018 outlook is favorable. To minimize downside risks, Nicaragua needs to further fortify its policy framework by (i) hastening the implementation of the international taxation law, reducing tax expenditures, rationalizing subsidies, and implementing a comprehensive reform of the Social Security, (ii) enhancing the supervisory perimeter, (iii) reinforcing the AML/CFT framework, and (iv) building financial buffers and further increasing international reserves.
In Costa Rica the Central Bank projects a 3.6% economic growth, but warns that without fiscal reforms, the deficit of the central government could reach 7.1% of GDP in 2018, and almost 8% in 2019.
The 2018-2019 macroeconomic program presented by the Central Bank reflects the complicated panorama that the Costa Rican economy will face this year.In a context of high fiscal deficit, and with a ministry of finance constantly resorting to the local market in search of resources to finance itself, it is expected that interest rates will rise, especially in the absence of fiscal measures to contain public spending.
Banco de Guatemala forecasts that the economy will grow between 3% and 3.8%, driven by a recovery in domestic demand and an international environment that could favor an increase
in external demand.
From the executive summary of a report by Banco de Guatemala:
Regarding the outlook for 2018 related to the domestic sphere, it should be noted that economic activity could grow in a range between 3.0% and 3.8%, due to a recovery in domestic demand and an international environment that could favor an increase in external demand.
The Central Bank has reported that in the third quarter of the year the Gross Domestic Product registered an interannual increase of 6.5%, mainly explained by the manufacturing industry and the agricultural sector.
From the quarterly report by the Central Bank:
DURING THE III QUARTER OF 2017 ECONOMIC ACTIVITY CONTINUED REGISTERING DYNAMISM HAVING GROWN 2.0%
Funides projects that 2017 will close with economic growth of 4.8%, explained mainly by the good performance of exports, which may slowdown in 2018.
From the preface to Funides' Third Economic Situation Report:
FUNIDES projects that the economy will close with a growth of 4.8 percent in 2017. Consumption, after having slowed down during 2016 and much of 2017, now shows signs of some stability, except in the case of consumption of durable goods.There has been a slowdown in investments, while exports of goods and services have shown an acceleration even in the third quarter of the year, and have been a key element in sustaining the current rate of growth.However, there are decreases in exports of harnesses and a slowdown in the textile sector, which is expected to have almost zero growth.Manufacturing continued to be driven by increased activity in certain export products, such as sugar and meat, although less favorable international prices are forecast. The deceleration in the collectionof taxes on added value and on income continued, a trend that had been highlighted in the previous Conjuncture Report.The accumulated deficit of the INSS was less negative as a result of an effort to reduce expenses, in a scenario of increased revenues. Remittances continued to rise, reaching an increase of 10.6 percent in nominal terms in September, well above the recent average. This increase in remittances has been generating a positive effect on consumption in the last months of the year.We are noticing a slowdown in private investment, which could close in figures lower than those of last year.
Banco de Guatemala plans to close the year with an estimated 3% growth in GDP, and by 2018 it foresees a rebound in economic activity.
A political crisis that seems to have no end, a decline in foreign investment and a slowdown in local economic activity explain most of the meager growth of 3% that Gross Domestic Product could end up registering this year.
At the end of the year the Nicaraguan economy could achieve a growth of 4.6%, a tenth less than in 2016, continuing the process of deceleration seen over the last two years.
From a report by Funides:
The Nicaraguan Foundation for Economic and Social Development (FUNIDES) presents its second Economic Situation Report for 2017, showing that economic growth for 2017 will be 4.6 percent, one tenth lower than last year, continuing the process of deceleration seen in the last two years.
The Central Bank has reduced the outlook for economic growth this year, arguing that there has been a slow recovery of the global economy and a slowdown in some sectors at the local level.
The Bank of Guatemala has reduced the expected growth rate for 2017 from a range of 3% to 3.4% to a range between 3% and 3.4%.At the local level it is estimated that one ofthe activities that will show reduced performance is construction, whose expected growth rate fell from 3.6% to 3.4%.
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