Central America Country Risk Report Q4 2018
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.
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.
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.
Learn how to effectively navigate the market research process to help guide your organization on the journey to success.Download eBook