## Central America: Seeking Resilient Growth and Social Cohesion in the Aftermath of Shocks

_IMF News, July 5, 2022_

## Source details

**Canonical URL:** [Central America: Seeking Resilient Growth and Social Cohesion in the Aftermath of Shocks](https://www.imf.org/en/news/articles/2022/06/29/cf-central-america-resilient-growth)

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## Bibliographic details
- Authors: Metodij Hadzi-Vaskov, Joyce Wong July
- Published: July 5, 2022

---

### Executive summary
- Policymakers in Central America, Panama and the Dominican Republic (CAPDR) have a unique opportunity to implement reforms to steer the region onto a path of more resilient and inclusive growth while addressing citizens’ crucial needs.
- Since the onset of the pandemic, CAPDR economies were among the best performers in Latin America; by 2021, all except Panama had surpassed pre-pandemic output levels.
- The region faces multiple, overlapping shocks—COVID-19, hurricanes Eta and Iota, and global secondary effects from the war in Ukraine—creating unusually high uncertainty and raising risks to the nascent recovery.

### Fragile recovery — observations and drivers
- Recovery performance:
  - By 2021, all CAPDR economies except Panama had surpassed pre-pandemic output levels.
- Policy response elements that supported recovery:
  - Historical cuts to monetary policy rates to help support economic activity.
  - Sharp expansion of social support and health spending in many cases unprecedented.
- External contributors to the recovery:
  - US recovery.
  - Region’s relatively high openness.
  - Reliance on remittances.
- Recent shocks and impacts:
  - Hurricanes Eta and Iota highlighted vulnerability to climate change; affected countries responded with swift support and began reconstruction.
  - As recovery was taking hold in 2022, the worldwide ramifications from the war in Ukraine affected the region most concretely through higher fuel and food prices; authorities responded with spending and tax measures to protect the nascent recovery and support the most vulnerable.
- Projection-level assessment:
  - These multiple shocks are projected to leave scars on the region’s level of GDP.
  - The negative impact on GDP is less than in 2021 projections, but it is larger than in advanced economies.

### A test of resilience — risks and constraints
- Key adverse global factors that could test resilience:
  - Further volatility of commodity prices amid the region’s high reliance on fuel imports.
  - Weaker growth in trading partners, including the US.
  - Tighter financing conditions due to faster increases in global and domestic interest rates.
  - Further moderation of remittance inflows, a lifeline for some economies.
- Policy space constraints:
  - Policymakers have little room for maneuvering given higher debt, among other factors.
- Overall outlook:
  - The region’s economic prospects are now subject to an unusually high degree of uncertainty; a potential confluence of adverse global factors could once again put economies’ resilience to the test.

### Opportunity for a new, stronger beginning — policy priorities and recommendations
- Core objective:
  - Renew focus on reforms to improve social conditions and reverse deterioration of pre-existing problems—high and persistent unemployment, poverty, and inequality—that have fueled migration.
- Priority policy areas and actions:
  - Create employment opportunities by increasing flexibility in labor markets, especially for women and youth who were most affected by the crisis.
  - Invest in infrastructure that is resilient to climate events.
  - Advance the digitalization agenda across both the public and private sectors to make the region more competitive.
- Timing and implementation note:
  - The process will take time, making it important to put in place strong domestic policies to improve resilience before the next shock arrives.

_Authors: Metodij Hadzi-Vaskov (Regional Resident Representative for Central America, Panama and the Dominican Republic) and Joyce Wong (Mission Chief for Honduras); July 5, 2022._

---


## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [Chart of the Week](https://www.imf.org/en/Blogs/chart-of-the-week)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/publications/weo](https://www.imf.org/en/publications/weo)
- [Global Economy in Crosscurrents of War and Technology](https://www.imf.org/en/publications/weo/issues/2026/07/08/world-economic-outlook-update-july-2026)
- [https://www.imf.org/en/publications/gfsr](https://www.imf.org/en/publications/gfsr)
- [Global Financial Markets Confront the War in the Middle East and Amplification Risks](https://www.imf.org/en/publications/gfsr/issues/2026/04/14/global-financial-stability-report-april-2026)
- [https://www.imf.org/en/publications/fm](https://www.imf.org/en/publications/fm)
- [Fiscal Policy under Pressure: High Debt, Rising Risks](https://www.imf.org/en/publications/fm/issues/2026/04/15/fiscal-monitor-april-2026)
- [https://www.imf.org/en/publications/reo](https://www.imf.org/en/publications/reo)
- [Asia and Pacific](https://www.imf.org/en/publications/reo/apac)
- [Europe](https://www.imf.org/en/publications/reo/eu)
- [Middle East and Central Asia](https://www.imf.org/en/publications/reo/meca)
- [Sub-Saharan Africa](https://www.imf.org/en/publications/reo/ssa)
- [Western Hemisphere](https://www.imf.org/en/publications/reo/wh)
- [https://www.imf.org/en/publications/areb](https://www.imf.org/en/publications/areb)
- [Getting to Growth in an Age of Uncertainty](https://www.imf.org/en/publications/areb/issues/2025/09/24/annual-report-2025)
- [More Publications](https://www.imf.org/en/publications)
- [Latin America Hit By One Inflationary Shock On Top of Another](https://www.imf.org/en/News/Articles/2022/04/15/cf-latin-america-hit-by-one-inflationary-shock-on-top-of-another)
- [Regional Economic Outlook for Western Hemisphere](https://www.imf.org/en/Publications/REO/WH/Issues/2020/10/13/regional-economic-outlook-western-hemisphere)
- [CAPDR Regional Office](https://www.imf.org/en/Countries/ResRep/CAM-Region)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2022/06/29/cf-central-america-resilient-growth_