1. Market Research
  2. > Energy & Environment
  3. > Energy
  4. > Oil and Gas Energy Market Trends
  5. > Central America Business Forecast Report Q1 2015

Central America Business Forecast Report Q1 2015

  • December 2014
  • -
  • Business Monitor International
  • -
  • 52 pages

Core Views

C entral American outperformers Costa Rica and Panama are facing a more challenging road ahead in the coming years. As real GDP growth slows in Panama on the back of the end of canal construction, establishing fiscal discipline will be crucial. Should the country fail to rein in spending in an environment of lower growth, this would likely cool investor enthusiasm towards the country. Similarly, Costa Rica is also facing a challenging fiscal outlook, although we believe the country is more likely to embrace fiscal consolidation after a sovereign credit rating downgrade by Moody’s. I n contrast, our outlook for most of Central America’s underperformers is brightening. Guatemala, Honduras and El Salvador will benefit from stronger US demand for their manufactured goods, rising remittance inflows and lower oil prices in the quarters ahead. That said, significant security risks will temper foreign direct investment into these countries over the next five years. Nicaragua’s macroeconomic position is also especially vulnerable, given its strong ties to Venezuela. Our core view is for a moderate slowdown in growth in the coming years due to an end to the Tariff Preference Level programme and our view that Venezuela will modestly reduce assistance to Nicaragua. However, if Venezuela were to suddenly cut off aid under the ALBA-TCP programme, this would see a sharp downturn in Nicaraguan growth and rising pressure on the country’s macroeconomic buffers.

Major Forecast Changes

We expect Costa Rica will see fiscal consolidation in the coming years, after a credit downgrade by Moody’s has prompted policymakers from across the political spectrum to declare support for shoring up the country’s fiscal accounts. After the country posted its largest fiscal deficit on record in 2014, at 5.9% of GDP, we expect the shortfall will shrink to 5.1% of GDP in 2015 and 4.4% in 2016. W e have revised down our forecast for Nicaragua 10-year average growth from 3.7% to 3.3% and revised up the country’s fiscal deficits.
This is predicated on our view that lower oil prices will weigh heavily on the Venezuelan economy, forcing the Andean economy to moderate its aid to Nicaragua under the ALBA-TCP oil alliance.

Table Of Contents

Central America Business Forecast Report Q1 2015
Executive Summary 15
Core Views 15
Major Forecast Changes 15
Key Risk To Outlook 15
Political Outlook - Regional 17
SWOT Analysis 17
Domestic Politics 18
Falling Oil Prices To Give Central America A Boost 18
A sustained drop in global oil prices will offer substantial benefits to Central America, strengthening macroeconomic buffers and
boosting growth.
Economic Outlook - Regional 21
SWOT Analysis 21
Economic Activity 22
US Acceleration A Tailwind For Central American Growth 22
Robust remittance inflows and rising demand for manufactured goods will buoy the Guatemalan economy in coming quarters.
Chapter 1.1: Political Outlook - Costa Rica 25
Domestic Politics 25
Credit Rating Downgrade To Prompt Fiscal Consolidation 25
Costa Rica's budget shortfall will begin to narrow in 2015 after the country posted its largest deficit on record in 2014.
Chapter 1.2: Economic Outlook - Costa Rica 27
Economic Activity 27
FX Stability Removing Impetus For Rate Hikes 27
Costa Rica's benchmark policy rate will remain at 5.25% through end -2015. The central bank's focus will be on supporting the
country's fragile economic recovery, particularly as exchange rate stability and a moderation in inflation reduce the impetus for further
monetary tightening.
Table: Monetary Policy 28
Chapter 2.1: Political Outlook - El Salvador 29
Domestic Politics 29
Flores Corruption Scandal Boosting FMLN's Election Prospects 29
Corruption allegations against a former Alianza Republicana Nacionalista president will bolster the ruling Frente Farabundo Martí para
la Liberación Nacional (FMLN)'s performance in El Salvador's March 2015 legislative election.
Chapter 2.2: Economic Outlook - El Salvador 31
Economic Activity 31
Private Consumption Facing Long-Term Headwinds 31
Stronger remittance inflows and a falling unemployment rate will boost El Salvador's private consumption growth moderately in the
short term. However, with a significant proportion of the population living in poverty, household spending will remain highly exposed to
economic shocks.
Table: Long-Term Macroeconomic Forecasts 31
Business Monitor International Ltd www.businessmonitor.com 3
Chapter 3.1: Political Outlook - Guatemala 33
Domestic Politics 33
Judicial Weakness Weighs On Business Environment 33
Alleged irregularities in the selection of Guatemala's Supreme and Appellate Court judges underpin our view that the country is
backsliding on efforts to bolster judicial independence.
Chapter 3.2: Economic Outlook - Guatemala 35
Economic Activity 35
Investment Opportunities Boost FDI, But Structural Weaknesses To Persist 35
Opportunities in the power, logistics and autos sectors will support an uptick in FDI inflows in the coming years, underpinning our view
for stronger average real GDP growth over the next half decade.
Table: Long-Term Macroeconomic Forecasts 35
Chapter 4.1: Political Outlook - Honduras 39
Domestic Politics 39
Prison Reform Will Not Cure Security Challenges 39
Ongoing reforms to increase prison capacity in Honduras will cut down on overcrowding in the coming quarters.
Chapter 4.2: Economic Outlook - Honduras 41
Economic Activity 41
Fiscal Deficit To Narrow, But Will Miss Government Projections 41
Honduras will narrow its fiscal deficit in the years ahead on the back of efforts to boost tax revenues and cut the public wage bill.
Table: Fiscal Policy 41
Chapter 5.1: Political Outlook - Nicaragua 43
Domestic Politics 43
Canal Development To Drive Public Unrest 43
Nicaragua's inter-oceanic c anal project will prompt a deterioration in the country's political risk profile as it moves toward the f irst phase
of construction.
Chapter 5.2: Economic Outlook - Nicaragua 45
Economic Activity 45
End Of Oil Alliance Would Threaten Macroeconomic Stability 45
Nicaragua faces rising threats to its economic stability, as falling oil prices increase the risk that Venezuela will end its energy
cooperation agreement with the Central American country.
Table: Long-Term Macroeconomic Forecasts 45
Chapter 6.1: Political Outlook - Panama 47
Domestic Politics 47
Security And Corruption Greatest Challenges For Varela 47
There will be limited improvement in Panama's political risk profile in the coming years.
Chapter 6.2: Economic Outlook - Panama 49
Economic Activity 49
Construction To Drive Growth Uptick 49
Real GDP growth in Panama will accelerate moderately in the coming quarters on the back of increasing construction activity related to
the final stages of the Panama Canal expansion.
Table: Long-Term Macroeconomic Forecasts 49
Chapter 7: BMI Global Assumptions 51
Global Outlook 51
Warning Signs Growing 51
Table: Global Assumptions 51
Table: Developed States, Real GDP GrowtH, % 52
Table: Emerging Markets, Real GDP Growth, % 53

View This Report »

Get Industry Insights. Simply.

  • Latest reports & slideshows with insights from top research analysts
  • 24 Million searchable statistics with tables, figures & datasets
  • More than 10,000 trusted sources
24/7 Customer Support

Talk to Amrita

+1 718 303 2019

Purchase Reports From Reputable Market Research Publishers
Biorefinery Technologies: Global Markets

Biorefinery Technologies: Global Markets

  • $ 6 650
  • Industry report
  • July 2016
  • by BCC Research

This BCC Research report provides a critical evaluation of the current status of commercial biorefinery markets and the ways in which recent environmental legislation and breakthroughs in technology will ...

Oilfield Process Chemicals: Global Markets

Oilfield Process Chemicals: Global Markets

  • $ 6 650
  • Industry report
  • September 2016
  • by BCC Research

Use this report to: - Analyze the chemicals involved in oil and gas exploration and production at the chemical manufacturing sales level - Discuss and classify the market on the basis of chemical application, ...

Industrial Plugs & Sockets Market by Protection, Type, End-User - Global Forecast to 2021

Industrial Plugs & Sockets Market by Protection, Type, End-User - Global Forecast to 2021

  • $ 6 328
  • Industry report
  • October 2016
  • by MarketsandMarkets

“The industrial plugs & sockets market is projected to grow at a CAGR of 4.82% from 2016 to 2021” The industrial plugs & sockets market is projected to reach USD 3.60 billion by 2021, growing at a ...


Reportlinker.com © Copyright 2016. All rights reserved.

ReportLinker simplifies how Analysts and Decision Makers get industry data for their business.