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Central America Country Risk Report Q1 2019

Central America Country Risk Report Q1 2019

We have a mixed outlook on Central American growth over the coming years

Costa Rica will post strong real GDP growth rates in Central America, underpinned by a strong expansion of investment, as well as resilient private consumption

Guatemala, Honduras and El Salvador will benefit from somewhat stronger US demand for their manufactured goods and rising remittance inflows, but security risks and social unrest in the wake of corruption scandals and a contentious election in Honduras will temper foreign investment

Meanwhile, growth in Nicaragua is likely to contract in 2018 as student-led protests have evolved into a political crisis, bringing economic activity to a standstill across much of the country and reducing the country's appeal as an investment and tourism destination

The potential for a re-evaluation of trade and immigration policy in the US under President Donald Trump could threaten Central American exports and remit-tance inflows moving forward Major Forecast Changes

We revised down our 2018 real GDP growth forecast for Nicaragua to -1 8%, from -0 9% previously, as the impact of the crisis on tourism and investment will likely linger more than we had previously anticipated

Key Risks

Should US growth underperform our expectations, coming in below our 2 9% forecast for 2018, this would translate into relatively weaker US demand for Central American manufactured goods In turn, this would dampen economic activity throughout the sub-region Additionally, a more aggressive stance on trade by the Trump administration could threaten regional access to US markets

A significant deterioration in the security environment of one of the countries, either due to rising social unrest following anti-corruption demonstrations or a spike in drug trafficking- or gang-related violence, could temper investment into that economy, weighing on economic activity


Brief Methodology
Regional – Executive Summary
Core Views
Major Forecast Changes
Key Risks
Regional – Economic Outlook
SWOT Analysis
Regional – Political Outlook
SWOT Analysis
Long-Term Political Outlook
Costa Rica – Country Risk Summary
Costa Rica – Economic Outlook
Monetary Policy
Costa Rican Rate Hike Underlines Economic Challenges
Costa Rica – Political Outlook
Domestic Politics
Labour Protests May Derail Fiscal Reform In Costa Rica
El Salvador – Country Risk Summary
El Salvador – Economic Outlook
Economic Growth Outlook
Modest Growth In El Salvador Supported By US Economic Strength
El Salvador – Political Outlook
Domestic Politics
Loss Of US Aid Would Be Blow To Northern Triangle
Guatemala – Economic Outlook
Economic Growth Outlook
Remittance Flows And Fiscal Stimulus To Support Guatemala Growth
THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.Central America Country Risk Q1 2019ContentsGuatemala – Political Outlook
Domestic Politics
Political Crisis To Test Guatemalan Institutions Again
Honduras – Country Risk Summary
Honduras – Economic Outlook
External Trade And Investment Outlook
Risks To Honduras' External Account Stability Rising
Honduras – Political Outlook
Domestic Politics
Immigration Threatening Honduras-US Relations
Nicaragua – Country Risk Summary
Nicaragua – Economic Outlook
Economic Growth Outlook
Nicaragua To Recover, Though US Poses Massive Downside
External Trade And Investment Outlook
Q&A: Nicaragua Human Rights Bill Would Have Significant Economic Impact
Currency Forecast
Nicaragua FX Scenarios: NIO Crawling Peg Unlikely To Hold
Nicaragua – Political Outlook
Domestic Politics
Returning Stability In Nicaragua Will See Government Attempt Fiscal Reform
Global Macro Outlook
Continued Growth Divergence And Policy Risks Ahead
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % y-o-y
TABLE: EMERGING MARKETS, REAL GDP GROWTH, % y-o-y
Index Tables
TABLE: CENTRAL AMERICA – MACROECONOMIC DATA AND FORECASTS

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