World Bank global economic prospects for Central America

By Mayora IP

According to the World Bank's Global Economic Prospects, growth in Latin America and the Caribbean region (LAC) rebounded to an estimated 6.7 percent in 2021, driven by favorable external conditions and pandemic-related developments.

Regional growth is projected to soften, to 2.6 percent in 2022 and 2.7 percent in 2023, as fiscal and monetary policy is tightened, improvements in labor market conditions continue to be sluggish, and external conditions become less supportive.

In Central America, growth will remain robust in 2022, at 4.7 percent, owing to an improved outlook for COVID-19 vaccinations and continued robust remittance inflows. Growth in most Caribbean countries is projected to accelerate in 2022, on account of the expected timing of the recovery in international tourist arrivals.

The durability of economic recovery in LAC, as elsewhere, depends on the control of the pandemic. COVID19 outbreaks, including those triggered by new variants of the virus, remains a downside risk even in countries with high vaccination rates. A sudden deterioration of investor sentiment, especially in an environment of elevated inflation and high government debt, could trigger debt servicing challenges and bouts of capital outflows. Economic disruptions related to extreme weather, partly related to climate change, and other natural disasters pose a significant risk not only for the regional growth outlook but also for the lives and livelihoods of people living in the region.