A livelier rebound
Costa Rica showed a higher-than-expected rebound of economic activity in 2021, driven by a favorable external evolution, particularly in the United States, the country’s major economic and trading partner. Perspectives for the outlook horizon will be conditioned by the presidential election outcome, for which the second round of voting will take place on April 3rd. We don’t expect another rebound like last year’s after the 2020 recession, except from tourism and associated activities that are returning toward long-term trends. But “nearshoring” and similar business strategies could boost FDI and exports, including the return of electronic components exports. Fiscal conditions are expected to continue improving, since fiscal discipline is on the agenda of both second-round presidential contenders. However, some stress could be felt this year associated with compliance with the current IMF agreement, and the eventual adjustments that the new government wishes to negotiate.
El Salvador’s GDP growth will fall this year toward its long-term trend of potential GDP growth of around 2.5%, after a robust and unexpected economic rebound in 2021. We expect economic activity to increase by around 3.5% y/y in 2022, as there is little room for a second-round rebound after the announced growth in 2021. Moreover, the gains in governance after the two traditional and radically opposed political parties were left behind could be undermined by experimental public policies, with no guarantees of success. Uncertainty is greater abroad than domestically since President Nayib Bukele continues enjoying robust support from Salvadorans. But this small, very open economy depends critically upon external financing that currently lacks confidence about the direction of the country.
Guatemala begins 2022 with tensions over corruption scandals, and persecution of lawyers, prosecutors and judges, many of whom participated in past anti-corruption cases. Despite these scandals, the economic recovery and confidence in the economy remains high. The latest data published by the Central Bank of Guatemala revealed a new record high for the ICAE (Confidence Index in the Economic Activity). For 2022, the IMF is projecting an economic expansion of 4.5%. This figure sits in the middle of the range forecast by the Central Bank (3.5%-5.5%). It´s a reasonable figure, given strong consumer confidence. January’s inflation continues decreasing (-0.04% m/m), taking the annual inflation rate to 2.87% y/y, below the 3% - 5% Bank of Guatemala’s target range. Fiscal accounts in 2021 showed significant improvement compared to 2020.
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