The IMF projects difficulties and opportunities in Central America

The economies of Central America, Panama and the Dominican Republic are subject to an “unusually high degree of uncertainty” due to a confluence of external factors that will have lasting consequences in the region, the International Monetary Fund said on Tuesday.

However, he indicated, there is “a unique opportunity” to reintroduce crucial reforms that improve social conditions and reverse the deterioration of pre-existing problems, including unemployment, poverty and inequality.

Among the external factors that will affect the region, the IMF mentioned the greater volatility of the prices of raw materials, the weakening of the economies of trading partners such as the United States, the more restrictive financing conditions due to high interest rates and moderate inflow of remittances.

These are, for the most part, effects caused by the war in Ukraine, which have increased the price of fuel and raw materials at a time when the economic recovery in the region was beginning to take hold.

The performance of the economies of Central America, Panama and the Dominican Republic has been one of the best in Latin America since the pandemic began: by 2021 only Panama’s Gross Domestic Product (GDP) had not exceeded pre-pandemic levels.

The IMF pointed out that this recovery was due in part to the rapid and comprehensive policies that governments promoted, including historic cuts in rates to boost activity, and the increase in spending on health and social assistance. But in addition, he indicated, to external factors such as the recovery of the US economy.

The region was hit at the same time by two hurricanes and the countries responded immediately with aid to the population and reconstruction measures, the agency said.

The IMF noted that governments must now focus on making labor markets more flexible to create employment opportunities, investing in infrastructure to be better prepared for climate change, and promoting digitization programs.

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