Central America – Caribbean Economic Forecast

By FocusEconomics

Regional GDP growth should soften slightly in 2024 from last year’s forecast, largely due to waning momentum in the US. That said, looser monetary conditions, lower average inflation and resilient tourism sectors will support momentum. Political instability, a weaker-than-expected US labor market and extreme weather events are downside risks.

Central America and Caribbean Inflation

Regional inflation fell to 2.7 percent in December (November: 2.9%). Available data suggests disinflation continued in January. Regional inflation should average lower in 2024 than in 2023 on a high base effect and the delayed impact of previous monetary policy tightening. The El Niño weather event stoking food and energy prices is an upside risk.

Panama: Inflation declines to lowest level since July 2023 in January

Inflation fell to 1.2 percent in January, down from December’s 1.9 percent. January’s reading marked the lowest inflation rate since July 2023. Looking at the details of the release, prices for food and non-alcoholic beverages rose at a weaker pace in January, while prices for clothing and footwear contracted at a largely steady rate compared to the previous month’s reading. Meanwhile, housing and energy price growth moderated.

Accordingly, the trend pointed down mildly, with annual average inflation coming in at 1.4% in January (December: 1.5%).

Finally, consumer prices rose 0.25 percent in January over the previous month, accelerating from December’s 0.08 percent rise. January’s uptick marked the highest reading since January 2023.

Peru: Economic activity dips in December

Economic activity slid 0.7 percent year on year in December (November: +0.3% yoy). Looking at the details of the release, the commerce sector rose at a quicker pace in December, while the agricultural sector lost momentum. Meanwhile, the construction sector declined at a softer rate. Lastly, activity in the manufacturing sector declined at a sharper rate, while mining and hydrocarbons production decelerated.

On a monthly basis, economic activity fell 0.6 percent in December (November: +0.8% mom), the worst result since July. Meanwhile, the trend pointed down, with the annual average variation of economic activity coming in at an over two-year low of minus 0.6%, down from November’s minus 0.4 percent reading.

Commenting on the outlook, Itaú Unibanco’s Julio Ruiz stated:
“We expect GDP growth to rebound to 2.5 percent this year, after falling by 0.6 percent in 2023 affected by social conflicts and harsh weather conditions. A likely moderate/weak El Niño phenomenon will likely curb activity rebound in Q1 2024.”