Log in
Forgot password ?
Become a member for free
Sign up
Sign up
New member
Sign up for FREE
New customer
Discover our services
Dynamic quotes 
News: Latest News
Latest NewsCompaniesMarketsEconomy & ForexCommoditiesInterest RatesBusiness LeadersFinance Pro.CalendarSectors

Central America Growth Potential

04/26/2021 | 04:55pm EDT

Prior to Covid-19, the Central America region grew at an average rate of more than 4.5 percent a year for nearly

three decades. The region's exports of goods and services grew robustly, including its manufactured exports.

Poverty fell and per capita incomes rose. Panama has made the most notable progress in catching up with the

level of U.S. per capita income, followed by Costa Rica. El Salvador and Guatemala moved up more slowly but

steadily, while Nicaragua and Honduras lagged others in catching up.

This sustained economic growth in 1991-2017 was achieved with little productivity growth. Labor accounted

for two-thirds of the region's GDP growth and capital for the rest. Rapid growth of the working-age population

made those increases in labor inputs possible. While labor's contribution will continue to be important, it is

likely to be less dominant in the future as the growth of the working-age population is projected to decline

sharply. Rising investment rates could compensate for this fall, provided their returns remain attractive. However,

given the existence of diminishing returns on capital accumulation, the sustainable growth in the long

term needs to come largely from improving efficiency in the use of factors. Higher productivity growth will

thus be essential to sustain robust economic gains and finding strategic options to ensure that outcome will be

paramount going forward.

The pandemic pushed the region into its deepest economic contraction in 2020 with recovery expected sometime

in 2021. The stimulus packages, that included higher social transfers, helped support citizens but it also

raised public debt and reduced fiscal space. Fortunately, the external environment has been faring better.1

Global trade in goods has returned to pre-pandemic levels, commodity prices are holding up, and remittances

are higher than a year earlier; Covid-19 has also accelerated the ongoing regionalization of global value chains

(GVCs). These developments augur well for the recovery of small open economies. Today is the time to write

the new phase of the region's future, for the benefit of current and future generations. To double its GDP per

capita in the next twenty years, the region's GDP would need to grow at a minimum rate of 3.5 percent annually,

not as high as was it was achieved in 1991-2017. In order to meet this target, raising productivity growth will

be crucial. Sustained growth in productivity is critical for economic prosperity as well as for lifting people out

of poverty. Long-term increases in earnings can only be maintained by raising productivity. Thus, the road to

poverty reduction and employment also requires higher productivity-growth.

However, in the past decades the region has been unable to experience sustained productivity growth, which

indicates the necessity to introduce reforms consistently over time to generate a significant structural change.

Investments in productivity-enhancing innovations can raise a country's economy-wide productivity growth

but the extent of their success depends on the availability and adequacy of complementary factors like education,

infrastructure, the efficiency of markets and the quality of institutions. Though Costa Rica and Panama are

better placed than others in the region, all countries compare unfavorably with their relevant peers, in respect

to these four factors.


World Bank Group published this content on 26 April 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 April 2021 20:54:07 UTC.

© Publicnow 2021
Latest news "Companies"
05:59pLOG IN LOGÍSTICA INTERMODAL S A  : Notice to the Market - Participation of Executives in Digital Media
05:59pDot Sheehan, Founder, President and CEO of Operation Hat Trick, to Appear on Next Steps Forward With Chris Meek June 22
05:57pEROAD  : Product Releases Quarter 2, 2021
05:55pFed officials open debate on bond taper
05:51pBritain begins negotiations to join trans-Pacific trade deal
05:51pBRAND HOLDINGS, LLC  : Acquires Healthy Skoop, the Third Acquisition in 12 Months Executing Its Direct-to-Consumer E-Commerce Strategy.
05:51pBARRETT-JACKSON  : 's Las Vegas Auction Soars with Record $48 Million in Sales, Historic Collector Car NFT Sale and Celebrity Guests, Including “Mr. Las Vegas” Wayne Newton
05:49pDEADLINE ALERT : Kessler Topaz Meltzer & Check, LLP Alerts Investors of Lead Plaintiff Deadline in Securities Fraud Class Action Lawsuit Against Pinterest, Inc.
05:46pTORCHLIGHT ENERGY RESOURCES  : upsizes stock sale by $150 million on retail trading boost
05:46pROSEN, RESPECTED INVESTOR COUNSEL, Encourages Ocugen, Inc. Investors With Losses Over $100K to Secure Counsel Before Important August 17 Deadline in Securities Class Action – OCGN
Latest news "Companies"