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COUNTRY INSIGHTS

GUATEMALA: The Good and the Bad
CENTRAL AMERICA · Report · 29 Nov 2017

This year hasn’t been bright for the Guatemalan economy. Real GDP growth is expected to fall below the 3.1% of 2016, despite U.S. economic recovery and large private remittance inflows. Inflation will be in the upper parte of the 3%-5% target range. Monetary policy remains under the control of t...

Bad Overshadowing (Some) Good
CENTRAL AMERICA · Report · 30 Oct 2017

Costa Rica’s short-term indicators continue to show economic activity slowdown, in line with our outlook for 2017. Lower capital inflows from abroad are one reason. The severe monetary contraction after the May FX turbulence is also reducing financial resources, thereby dampening consumer spendin...

El SALVADOR: We’re Pessimistic
CENTRAL AMERICA · Report · 29 Sep 2017

The economic outlook for El Salvador in the short term continues to be for low economic growth, with severe fiscal constraints. Lack of economic dynamism is driven by both political and economic factors. Uncertainty and negative expectations discourage investment. Moreover, fiscal restriction imp...

Guatemala: No Surprises, But Rising Worry
CENTRAL AMERICA · Report · 30 Aug 2017

The outlook for the Guatemalan economy has not changed significantly since March, when we discussed our 2017-2018 outlook. Growth continues to be moderate; support for the current account remains positive, basically due to a rise in private remittances; the fiscal situation remains under control;...

Cost Rica: Staring Down Tough Times
CENTRAL AMERICA · Report · 27 Jul 2017

The Costa Rican economy will keep adjusting over the next 18 months. The strategy of low interest rates and relative currency stability followed in 2015-2016 started to break down in H1 2017, as shown by the events in Q2, when the Central Bank raised its monetary policy rate five times, from 1.7...

COSTA RICA: A Happy Ending? Not Exactly
CENTRAL AMERICA · Report · 28 Jun 2017

Costa Rica’s Central Bank succeeded in controlling FX market turmoil in May, bringing the exchange rate down from the high levels it reached by the third week of May. But pressures persist, since Central Bank FX market intervention has not been neutral over the medium and long-term, as the offici...

COSTA RICA: Currency Issues Hit the Headlines
CENTRAL AMERICA · Report · 29 May 2017 · 3 responses

Currency issues have burst into the Costa Rican headlines. After more than two years of a relatively stable managed exchange rate, the Central Bank in recent weeks implicitly changed its intervention rule, allowing for greater volatility. In just the first 23 days of May, the wholesale exchange r...

El Salvador: An Unfortunate Step Backward
CENTRAL AMERICA · Report · 26 Apr 2017 · 1 response

El Salvador has taken a step backward in its efforts to improve economic conditions. What we consider an unfortunate government decision – the announcement that it has been forced to miss payments on pension certificates – has created unnecessary turmoil, with unwanted consequences. New downgrade...

El Salvador Misses April Payment of Pension Certificates
CENTRAL AMERICA · Report · 18 Apr 2017

The facts: on Friday April 7th, 2017, the government started to miss debt payments to the private pension funds (Certificados de Inversión Previsional through the trust fund for pensions created in 2006), to finance annual outlays of the PAYG system (currently close to $500 million yearly). By mi...

Costa Rica: Increase in policy rate
CENTRAL AMERICA · Report · 07 Apr 2017

The Board of the Central Bank increased its monetary policy rate yesterday, from 1.75% to 2.25%. It was the first change since January 2016, when the rate went down from 2.25% to 1.75%. The Board considered the movement as a preventive one, as inflation had increased in recent months (1.36% in th...

GUATEMALA: Moderate Growth and Stability Expected
CENTRAL AMERICA · Report · 30 Mar 2017

Guatemala experienced a year of adjustment in 2016, after the political turmoil of 2015. The new administration spent its first months negotiating a learning curve, given President Jimmy Morales’ lack of political experience. It was also a year of adjustment to a new political balance in Congres...

Uncertainty Is the Name of the Game
CENTRAL AMERICA · Report · 24 Feb 2017

In the short term, uncertainty is the name of the game for Central America. The escalation of protectionism in developed countries is evidenced by recent events such as Brexit and the U.S. presidential elections, reinforced by rising populist movements in Europe in the runup to elections. The imp...

External Conditions Shift to Negative
CENTRAL AMERICA · Report · 01 Feb 2017

El Salvador closed 2016 with negative inflation, a first at yearend since 1999 (-0.9% y/y). Estimates of last year’s economic growth are controversial. The official figure of 2.5% y/y is considered optimistic by private sector representatives and analysts, and by international organizations like ...

COSTA RICA: The Central Bank announced its Macroeconomic Program 2017-2018
CENTRAL AMERICA · Report · 27 Dec 2016

Just before Christmas, the Costa Rican Central Bank announced its Macroeconomic Program for 2017-2018. There are no major changes in its policy framework: The Bank´s monetary policy will continue to pursue an Inflation target of 3.0% ± 1.0 p.p., using the policy rate as its main instrument. T...

Bad Global News
CENTRAL AMERICA · Report · 22 Dec 2016

World conditions look uncertain, and less friendly to Central American economies. Global uneasiness has been exacerbated by rising populist movements, and events like Brexit, and the election of Donald Trump. On the positive side, interest rates could continue to gradually climb, along with inter...

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