You are here
Central America & Caribbean Regional Outlook -December 2013
The global economic recovery is setting a positive tone for the 2014-15 Central American and Caribbean economic outlook.
The improving economic performance in the United States -the most relevant economy for the region- combined with persistent high growth in China (yet at a somewhat milder rate of expansion), a building momentum in the United Kingdom and a return to growth in the euro zone, are all factors that bode well for the region's growth prospects. Nevertheless, the prospect of interest rate normalization in advanced economies may instill a higher dose of financial market volatility in most countries in the developing Americas in the first half of the new year.
Uneven Regional Economic Growth Dynamics
The region remains highly dependent on the US economy through tourism, remittances and investment flows. Improving US economic conditions are evident in auto and housing sector activity and labour markets. We anticipate that the US real GDP will expand by 2.8% on average in the coming two years, following an estimated 1.6% expansion in 2013. After the 2008-09 global financial shock, tourism activity and investment in large-scale projects decelerated significantly in the Caribbean and have yet to recover. However, China is playing an increasingly important role in the new investment environment.
Real output in Central America and the Caribbean will likely expand by 2.2% in 2013; we anticipate that the growth rate will subsequently accelerate to 3.2% y/y on average in the 2014-15 period. Panama, Costa Rica and the Dominican Republic (DR) will lead the regional growth charts whereas Barbados and the highly leveraged Jamaican economy will be the underperformers (but will return to positive rates of growth). Elsewhere in the region, low and modest growth continues to be the norm. The English-speaking Caribbean economies will underperform Central and Latin America as a whole, with output expanding by 2.7% in 2014-15.