How will the economies of Central America and the Dominican Republic fare in 2023?

Specialized organizations, such as the Economic Commission for Latin America and the Caribbean (ECLAC), have warned that all subregions will show lower growth in 2023. 

In these forecasts, the Gross Domestic Product (GDP) of Central America will grow 4,2% in 2022, but in 2023 the variation will be 3%.

For the economies of the region, the low dynamism of the United States, the main trading partner and main source of family remittances to the countries, will affect both the external sector and private consumption.

In this case, however, the decrease in the prices of basic goods would act in favor of these economies, since several of them are net importers of food and energy.

Also, the monetary authorities of each country have made their forecasts for the coming year.

COSTA RICA

In October, the Central Bank of Costa Rica (BCCR) revised downward economic growth for 2023, estimating it at 2.7%, that is, 0.5 points below the projection made in July (3.2%).

According to the entity, the Costa Rican economy will be marked in 2023 by low growth and inflation that may continue, for the second consecutive year, above the goal established by the Central Bank.

EL SALVADOR

The Central Reserve Bank of El Salvador (BCR) forecasts that the country’s economy will grow between 2% and 3% in 2023, reflecting the impact of the slowdown in the world economy, offset by the dynamism of domestic demand. The financial institution stated that this “dynamism” will be driven “by public investment, better security conditions that favor consumption and private investment, as well as tourism.”

GUATEMALA

The Bank of Guatemala (Banguat) estimates a slight growth in 2023 of 4%, driven by domestic consumption and stability in exports, this despite the global economic slowdown due to international conflicts.

The country’s internal consumption will benefit to a large extent from the flow of family remittances, sent mainly from the United States, which this year will close with a historical record equivalent to US$18.048 billion.

HONDURAS

In the review that the Central Bank of Honduras (BCH) made in August, it established that GDP growth for 2022 will be between 4.0% and 4.5%, and for 2023 it will be 3.5% and 4.5%.

According to the Institute for Economic and Social Research (IEES) of the National Autonomous University of Honduras (Unah), the challenge that the government will have to face for next year is to guide public policy “to generate the necessary conditions to promote greater growth sustainable and inclusive economy.

NICARAGUA

The president of the Central Bank of Nicaragua, Ovidio Reyes, said GDP growth in 2022 will be 4.0%, the second consecutive year on the rise after three years of closing with a red balance.

In 2023, the Nicaraguan economy will grow between 3% and 4%, “in a world environment where world growth will be more timid and industrial economies will grow around 1%.”

Reyes said that for now the producers and the export sector of Nicaragua must “seek to have more gains in production volume to compensate for the moderation of prices.”

PANAMA

Looking to 2023, ECLAC forecasts that the Panamanian economy will grow by 4.2%, above the average for the region, which will be 1.3%. This percentage is due to the country’s low inflation, which stood at 1.5% year-on-year in November.

Economist Ernesto Bazán told local media that if 2022 was challenging, 2023 will be much more. “In the Panamanian case we have aggravating factors, we have the crisis of the pension system that becomes a check on the part of the risk rating agencies, and if we lose the investment grade, we will lose competition.”

DOMINICAN REPUBLIC

ECLAC forecasts that the Dominican economy will expand by 4.6% in 2023, but government authorities forecast in the general budget for next year’s fiscal year that it will be 4.8%.

With these forecasts, the country will be one of those that will have the best performance in the face of the new risks imposed by inflation and the slowdown in global growth for 2023 forecast by specialized organizations.

With information from Bloomberg