NewsWhore
03-21-2012, 01:00 PM
Central American countries are following increasingly diverging paths in terms of economic growth and public finance, according to a new report issued by international ratings agency Fitch Ratings.
The report, "Central America's Fiscal Dilemma: Growth Versus Debt," describes two different types of economies in the region: dynamic, export-oriented service economies and slow-growing remittance-based economies.
Costa Rica and Panama fall into the former category and Guatemala and El Salvador the latter.
The report projects aggregate economic growth in the region will slow to 4.2% next year n down 0.5% from the 4.7% aggregate growth seen in 2011 n and recover slightly to 4.5% growth in 2013. Panama, the report noted, is the region's fastest-growing economy while El Salvador is seeing the slowest growth.
According to Fitch, over-reliance by regional economies on the United States as a major source of hard currency, with the exception of Panama, threatens growth in Central America. Regional economies are also characterized by "modest debt burdens compared to peers" and recurring structural deficits due to low tax-revenue bases and "rigid expenditure profiles," the report said.
Despite these similarities, two distinct paths for economic development and public finance have appeared in the region.
According to the Fitch report, the Dominican Republic splits the middle between the two divergent paths described in the document. There, high growth has been supported by a competitive tourism sector augmented by a strong reliance on remittances from abroad. Fitch indicated that the country's debt burden increased from 2006 to 2010. The report also indicated that the debt burden could have decreased, but the government issued debt to the tune of 4% of the country's GDP to recapitalize the Central Bank for funds it lost in a 2003 banking crisis.
The World Bank reported in December it expected remittances to developing countries worldwide to reach some $351 billion in 2011, with that number expected to grow to $441 billion by 2014. Remittances to Latin America grew by 7 percent in 2011, according to the World Bank.
Regionally, the Fitch report indicated, Panama has seen the most dynamic growth in recent years and has received two credit-rating upgrades since 2008. Costa Rica's credit rating was upgraded in 2011 and the Dominican Republic's ratings were given a "Positive Outlook" that year. El Salvador's credit ratings, on the other hand, were downgraded in 2009 and Guatemala's sovereign ratings haven't changed since 2006, according to the ratings agency.
www.ticotimes.net/Current-Edition/Top-Story/Paths-diverging-for-region-s-economies_Friday-March-16-2012 (http://www.ticotimes.net/Current-Edition/Top-Story/Paths-diverging-for-region-s-economies_Friday-March-16-2012)
More... (http://www.dr1.com/index.html#2)
The report, "Central America's Fiscal Dilemma: Growth Versus Debt," describes two different types of economies in the region: dynamic, export-oriented service economies and slow-growing remittance-based economies.
Costa Rica and Panama fall into the former category and Guatemala and El Salvador the latter.
The report projects aggregate economic growth in the region will slow to 4.2% next year n down 0.5% from the 4.7% aggregate growth seen in 2011 n and recover slightly to 4.5% growth in 2013. Panama, the report noted, is the region's fastest-growing economy while El Salvador is seeing the slowest growth.
According to Fitch, over-reliance by regional economies on the United States as a major source of hard currency, with the exception of Panama, threatens growth in Central America. Regional economies are also characterized by "modest debt burdens compared to peers" and recurring structural deficits due to low tax-revenue bases and "rigid expenditure profiles," the report said.
Despite these similarities, two distinct paths for economic development and public finance have appeared in the region.
According to the Fitch report, the Dominican Republic splits the middle between the two divergent paths described in the document. There, high growth has been supported by a competitive tourism sector augmented by a strong reliance on remittances from abroad. Fitch indicated that the country's debt burden increased from 2006 to 2010. The report also indicated that the debt burden could have decreased, but the government issued debt to the tune of 4% of the country's GDP to recapitalize the Central Bank for funds it lost in a 2003 banking crisis.
The World Bank reported in December it expected remittances to developing countries worldwide to reach some $351 billion in 2011, with that number expected to grow to $441 billion by 2014. Remittances to Latin America grew by 7 percent in 2011, according to the World Bank.
Regionally, the Fitch report indicated, Panama has seen the most dynamic growth in recent years and has received two credit-rating upgrades since 2008. Costa Rica's credit rating was upgraded in 2011 and the Dominican Republic's ratings were given a "Positive Outlook" that year. El Salvador's credit ratings, on the other hand, were downgraded in 2009 and Guatemala's sovereign ratings haven't changed since 2006, according to the ratings agency.
www.ticotimes.net/Current-Edition/Top-Story/Paths-diverging-for-region-s-economies_Friday-March-16-2012 (http://www.ticotimes.net/Current-Edition/Top-Story/Paths-diverging-for-region-s-economies_Friday-March-16-2012)
More... (http://www.dr1.com/index.html#2)