Government exploring fiscal reform possibilities
With Magín Díaz at the helm of the new Ministry of Finance and Economy, discussion is underway about whether the government is preparing to propose a fiscal reform plan. Increasingly clear signals suggest that such a debate may be approaching. Diaz has been meeting with business sector representatives over initiating an “open dialogue” about fiscal and financial matters.
Economic activity growth data, up 1.3% y/y in June 2025, again showed a marked slowdown, contributing to a growth rate of 2.4% ytd in H1 2025. Inflation rose to 3.4% y/y in July, remaining within the target range.
Credit in July 2025 has responded only timidly to the liquidity-boosting measures adopted by the Central Bank in June, increasing by nearly 10% y/y, while bank interest rates have remained relatively stable.
The external sector continues to perform robustly, driven by excellent gold and cocoa export results, the expansion of free zone exports and the strong growth of remittances and tourist arrivals. Still, the currency recorded a monthly depreciation of 1.86% against the dollar in July, and has continued to depreciate since June, while net international reserves remain above $14 billion.
Government budget execution is on track, but control of primary spending has been achieved through a sharp contraction in capital expenditure.
In the area of institutional reform, the law creating the Ministry of Finance and Economy was enacted, merging the Ministry of Finance and the Ministry of Economy, Planning and Development.
Reform of the Penal Code was approved, after 20 years of congressional debate—although the magnitude of the political cost of this initiative remains to be seen.
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