Re­gion’s eco­nomic growth sta­bi­lizes in 2016

The Star (St. Lucia) - - CLASSIFIED - By Ri­cardo Aceves, Se­nior Econ­o­mist

In con­trast to other sub­re­gions in Latin Amer­ica, Cen­tral Amer­ica and the Caribbean, with its close ge­o­graph­i­cal and eco­nomic ties with the United States, is ben­e­fit­ting from the grad­ual re­cov­ery of the U.S. econ­omy as well as from the fall in oil prices. Fall­ing com­modi­ties prices led to some di­ver­gence in the terms of trade of some economies within the re­gion, es­pe­cially be­tween oil ex­porters and oil im­porters. De­clin­ing prices for oil, met­als, as well as agri­cul­tural goods wors­ened the terms of trade for com­modi­ties ex­porters, but im­proved the terms of trade of com­modi­ties im­porters. The re­gion as a whole, how­ever, ben­e­fited from lower oil prices as Cen­tral Amer­ica and the Caribbean is a net im­porter of hy­dro­car­bons. On bal­ance, the re­gion's cur­rent ac­count deficit is ex­pected to im­prove from 2.4% of GDP in 2014 to 1.3% of GDP in 2015 and re­main rel­a­tively stable at 1.5% of GDP in 2016.

Eco­nomic growth in Cen­tral Amer­ica and the Caribbean per­formed rel­a­tively well in 2015. Fol­low­ing a mild de­cel­er­a­tion in the sec­ond quar­ter, the re­gion's econ­omy picked up pace in the third. Ac­cord­ing to Fo­cusE­co­nomics Con­sen­sus Forecast, the econ­omy of Cen­tral Amer­ica and the Caribbean is ex­pected to have in­creased 3.1% yearon-year in Q3, which came in above the 2.8% ex­pan­sion reg­is­tered in Q2.

The eco­nomic out­look for the re­gion re­mains stable and Cen­tral Amer­ica and the Caribbean is ex­pected to con­tinue ben­e­fit­ing from the grad­ual re­cov­ery in the U.S. econ­omy. Fol­low­ing an ex­pected 3.0% ex­pan­sion in 2015, an­a­lysts par­tic­i­pat­ing in this month's Fo­cusE­co­nomics Con­sen­sus Fore­casts see the re­gion's GDP in­creas­ing 3.2% in 2016. This month's forecast matched the pre­vi­ous month's pro­jec­tion. At this rate, growth in Cen­tral Amer­ica and the Caribbean will be faster than in Latin Amer­ica as a whole, which is ex­pected to ex­pand only a timid 0.6% next year.

Look­ing at the coun­tries in the re­gion, the out­look for 2016 was re­vised down for Haiti, Hon­duras, Panama, Ja­maica and Trinidad and Tobago. Fore­cast­ers left their GDP growth pro­jec­tions un­changed for the rest of the economies sur­veyed, with the ex­cep­tion of the Do­mini­can Repub­lic, whose GDP growth forecast was re­vised up. In 2016, Panama is pro­jected to be the re­gion's fastest-grow­ing econ­omy with an es­ti­mated 6.3% ex­pan­sion. The Do­mini­can Repub­lic re­mains close be­hind with a pro­jected 5.1% growth rate. Puerto Rico will be the worst per­former as its econ­omy is fore­seen con­tract­ing by 0.7%.

In­fla­tion re­mains sub­dued. In­fla­tion out­look con­tin­ues to mod­er­ate. In­fla­tion­ary pres­sures in Cen­tral Amer­ica and the Caribbean are ex­pected to re­main con­tained for the re­main­der of 2015. A Fo­cusE­co­nomics es­ti­mate showed that in­fla­tion in the re­gion rose from 1.9% in Septem­ber to 2.1% in Oc­to­ber. In­fla­tion has hov­ered around 2.0% in the last three months and is fore­seen to mod­er­ate at the end of the year.

Fore­cast­ers polled by Fo­cusE­co­nomics this month ex­pect in­fla­tion to end this year at 1.8%. As low oil prices con­tinue to dampen con­sumer prices, an­a­lysts cut the re­gion's in­fla­tion pro­jec­tion by 0.4 per­cent­age points over the pre­vi­ous month's pro­jec­tion. For 2016, pan­elists see in­fla­tion ris­ing grad­u­ally and reach­ing 2.8% at the end of year. The 2016 in­fla­tion forecast was cut from last month's 3.1% pro­jec­tion and re­flected lower in­fla­tion pro­jec­tions for six of the twelve economies sur­veyed, in­clud­ing size­able cuts in Costa Rica, Panama and Puerto Rico. In­fla­tion fore­casts for Belize, Hon­duras, Nicaragua and Ja­maica were left un­changed, while pro­jec­tions for Gu­atemala and Haiti were raised com­pared to the pre­vi­ous month.

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