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Central America Country Risk Report Q4 2018

Central America Country Risk Report Q4 2018

Key View:

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

Panama and Costa Rica will post the strongest 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.

Nicaragua will enter a recession as student-led protests have evolved into a political crisis, bringing economic activity to a standstill across much of the country.

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.

Forecast Changes

We revised down our 2018 real GDP growth forecast for Nicaragua to -0.9%, from 3.2% previously. Widespread protests against the Ortega regime have signifi-cantly undercut activity and reduced the country's appeal as an investment and tourism destination.

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 in that economy, weighing on economic activity.


Brief Methodology
Regional – Executive Summary
Core Views
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
Currency Forecast
Costa Rican Colón Likely To Modestly Depreciate In Longer Term
TABLE: CURRENCY FORECAST
Costa Rica – Political Outlook
Domestic Politics
In Costa Rica, Social And Fiscal Issues Will Challenge Policymakers In Months Ahead
El Salvador – Country Risk Summary
El Salvador – Economic Outlook
Economic Growth Outlook
El Salvador Economy To Grow Steadily, But Downside Risks Mounting
El Salvador – Political Outlook
Domestic Politics
Scandal Opens Door For Bukele In El Salvador Presidential Race
Central America Country Risk Q4 2018ContentsGuatemala – Country Risk Summary
Guatemala – Economic Outlook
Economic Growth Outlook
Growth To Accelerate In Guatemala Over Near Term
Guatemala – Political Outlook
Domestic Politics
Guatemala’s Morales On Firmer Ground, Despite New Allegations
Honduras – Country Risk Summary
Honduras – Economic Outlook
External Trade And Investment Outlook
Honduras’s External Stability Not Threatened By Wider Current Account Deficit
Honduras – Political Outlook
Domestic Politics
Honduran President’s Weak Mandate Will Limit Policy Formation
Nicaragua – Country Risk Summary
Nicaragua – Economic Outlook
Economic Growth Outlook
Political Crisis To Push Nicaragua Into Recession In 2018
External Trade And Investment Outlook
Political Unrest Threatens Nicaragua’s External Account Stability
Nicaragua – Political Outlook
Domestic Politics
Nicaragua Scenarios: Ortega Likely To Stay In Power Through 2021
Global Macro Outlook
Strong Growth, But Greater Headwinds Too
TABLE: GLOBAL MACROECONOMIC FORECASTS
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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