Worry in the runup to a second Trump administration
El Salvador’s macroeconomic conditions are worsening. Economic activity has continued to be relatively stagnant, and has yet to show positive results from economic policy actions other than in some scattered indicators, such as in tourism. Foreign remittances have decelerated, while the fiscal deficit has increased. President Nayib Bukele’s popularity remains high, confirming support for his economic policy actions. However, a set of articulated measures to foster economic growth is not known, while fiscal adjustment to improve long-term sustainability would arrive via an IMF program that may come to fruition soon. The current account turned positive in H2 2024 compared to a year before, thanks to the boom in tourist inflows. CPI inflation decreased markedly, while the WPI is moving in the opposite direction.
Costa Rica's economy in 2024 has shown good results, with continued stability, but some indicators suggest a less favorable 2025 outlook. For instance, public finances, private consumption expenditures, private investment and exports all showed weaker expansion rates than a year ago. We estimate that GDP growth for 2024 will be close to 4%, and lower in 2025. Finance Minister Nogui Acosta recently expressed government´s intention to continue seeking congressional approval for several proposals, among them a global income tax reform. Other initiatives include taxes on companies producing from free zones, and the sale of public assets. We can summarize 2024 as a period of reasonable economic conditions, but with lower dynamism. It has also been a year of new challenges affecting the economy, which will undoubtedly condition the start of 2025.
Guatemala has one of the most stable economies in Latin America. Yet the country continues to face significant challenges, such as migration, insecurity, drug trafficking and corruption. Considering these issues, and U.S. President-elect Donald Trump’s campaign promises, it is important to examine the potential near-term consequences for Guatemala. As the economy heavily relies upon remittances, which contribute nearly $20 billion annually and account for 20% of GDP, stricter U.S. immigration policies could reduce these inflows. That would restrict household consumption, which drives 90% of GDP, and trigger a broader economic slowdown. A rise in U.S. aid cuts under Trump, without simultaneously addressing Guatemala's socioeconomic issues like unemployment and inequality, could increase migration pressures, despite temporary reductions. Meanwhile, the Guatemalan economy has not shown significant changes since our last report.
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