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Regional Economic Outlook

October 2021 Regional Economic Outlook for Western Hemisphere - Cover

Western Hemisphere

Regional Economic Outlook
October 2022

Recent developments in the Western Hemisphere—that is, the United States/Canada and Latin America and the Caribbean (LAC)—have been dominated by the impact of two distinct global shocks: the COVID-19 pandemic and then the Russian invasion of Ukraine. A third shock—the tightening of financial conditions—is now shaping the outlook. After contracting sharply in 2020, most of the Western Hemisphere’ economies recovered strongly in 2021 and early 2022, helped by the global recovery, the normalization of service sectors, and booming commodity prices. However, inflation pressures built up with pandemic-related disruptions, expansionary policies, rebounding demand, and the impact of the war in Ukraine on energy and food prices. The swift response of LAC’s monetary authorities to rising inflation—well ahead of other economies—helped contain price pressures and keep long-term inflation expectations anchored, but inflation remains high. Amid global monetary and financial tightening, and the ensuing slowdown in global growth and softening of commodity prices, activity is expected to decelerate throughout the Western Hemisphere in late 2022 and 2023, while inflation pressures are expected to recede gradually. Downside risks dominate the outlook and stem from tighter financial conditions, a more pronounced global slowdown, and entrenched inflation. For LAC, a sharp fall in commodity prices and social unrest are important risks. With inflation yet to abate and most economies still operating at or near potential, monetary policy should avoid easing prematurely and must stay the course. Clear communication of policy intentions will be key to reducing uncertainty and keeping inflation expectations anchored. Fiscal support deployed to mitigate the impact of inflation on the most vulnerable should be accompanied by compensating measures, where fiscal space does not exist, but also support monetary authorities’ efforts to tame inflation. Given rising financing costs, strengthening fiscal frameworks and advancing with inclusive fiscal consolidation—that protects key social objectives—will be essential to credibly putting public debt on a firm downward path while ensuring social stability. Boosting LAC’s medium-term growth requires raising productivity and good-quality public and private investment. Supply-side policies should focus on strengthening human capital, simplifying and modernizing labor regulations, and lifting barriers to firm entry and exit.

Read more: Regional Economic Outlook for the Western Hemisphere, October 2022

This web page presents information about the work of the IMF in Central America, Panama and the Dominican Republic, including the activities of the IMF Regional Representative Office. Additional information can be found on the IMF country pages of the enlarged Central American region (Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua and Panama), including official IMF reports and Executive Board documents in English and Spanish that deal with Central America as a region and with each of its countries.

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At a Glance

  • CA-7: Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama and Dominican Republic
  • Costa Rica Joined the Fund on January 08, 1946
  • El Salvador, Nicaragua, and Panama Joined the Fund on March 14, 1946
  • Dominican Republic and Guatemala Joined the Fund on December 28, 1945
  • Honduras Joined the Fund on December 27, 1945
  • Total Quotas: Net cummulative allocation SDR 1,230.60 Million; Holdings: SDR 1,027.62 Million
  • Loans outstanding: ECF arrangements (Honduras and Nicaragua) SDR 132.54 Million;
  • Stand-by Arrangements (Dominican Republic) SDR 703.76 Million

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IMF's Work on Central America 

  • Panama: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Panama

    March 24, 2023

    Series:Country Report No. 2023/122

  • IMF Executive Board Concludes 2022 Article IV Consultation with Panama

    March 24, 2023

    In the decade-and-half preceding the Covid-19 pandemic, an unprecedented construction and investment boom precipitated a rapid economic expansion in Panama. The Panama Canal and Tocumen Airport were expanded, there was large scale building of new skyscrapers in Panama City, and one of the largest copper mines in the world was constructed. Economic growth was further supported by the expansion of the services and logistics sectors, which benefited from the widening of the Panama Canal. With a rapid expansion of the capital stock, real GDP grew by 6 percent annually, poverty declined sharply, and income levels rapidly converged with those in advanced countries.

  • Guatemala: Staff Concluding Statement of the 2023 Article IV Mission

    March 14, 2023

    Guatemala should continue to build on the achievements made in economic policy. The Guatemalan economy continued to show resilience in 2022, with growth exceeding its potential. Macroeconomic and financial stability was preserved despite an unfavorable global context—trading partners’ growth slowing down, prices surging, and global monetary conditions tightening. Large remittance inflows and vibrant bank credit to the private sector have played an important role in sustaining solid private consumption. Also, large levels of international reserves persist. Stability was also the result of prudent monetary and fiscal policies.

  • Costa Rica: Technical Assistance Report-Upgrading the Rule-Based Fiscal Framework

    February 22, 2023

    Series:Country Report No. 2023/097

  • Crypto Assets and CBDCs in Latin America and the Caribbean: Opportunities and Risks

    February 17, 2023

    Author/Editor:Maximiliano Appendino | Olga Bespalova | Rina Bhattacharya | Jean François Clevy | Nan Geng | Takuji Komatsuzaki | Justin Lesniak | Weicheng Lian | Sandra Marcelino | Mauricio Villafuerte | Yorbol Yakhshilikov