IDB report: Central America, Panama and Dominican Republic recover, but with certain challenges
Costa Rica, El Salvador, Guatemala, Nicaragua, and the Dominican Republic have already reached the 2019 level of economic activity. However, although Panama is expected to record the highest growth on the continent in 2021, its output would not reach pre-pandemic levels until late 2022 or 2023, due to the economic effect of the severe 2020 shutdown. Although Belize has experienced a solid rebound, it would return to its pre-pandemic production level between 2022 and 2023 due to its heavy reliance on the tourism sector, as would Honduras, which was the country most affected by the hurricanes.
Although 2021 was a year of upturn for the region, the upturn in employment has occurred at a slower pace than that of economic activity. This is due, among other things, to the fact that sectors with the greatest potential for employment generation, such as construction, hotels and restaurants and commerce, have lagged behind other less labor-intensive sectors, such as manufacturing, telecommunications, energy, and agriculture. This situation has affected informal and less qualified workers, such as women and young people, to a greater extent.
To ensure the generation of quality jobs, the IDB Group has focused on supporting the productive development of MSMEs, which account for 99% of the region’s enterprises and provide between 65% and 70% of employment for the economically active population, promoting exports, market access and financing of the productive fabric, with emphasis on the incorporation of small rural producers into the main value chains.
In the 2020-2021 period, the IDB Group leveraged USD 5,634 million in support to the region to address the challenges of the pandemic, contributing not only to the immediate health and care response to vulnerable populations, but also to support the productive fabric and employment, as well as interventions aimed at economic recovery in the face of the pandemic.
The IDB Group approved USD 3,377 million in 2021 alone for the countries of Central America and the Dominican Republic. This financing exceeded by more than 20% the average approvals of the 2016-2019 period as a result of a high participation of the private sector, which in 2021 accounted for 35% of the approved volume.
The IDB continued to support the response to the COVID-19 crisis, while promoting initiatives for the region’s recovery in areas such as competitiveness, the digital agenda, MSME financing, fiscal management, social investment, agricultural innovation, and food security. IDB Invest, the IDB Group’s private sector investment arm, focused on supporting the productive fabric and employment, especially SMEs and their value chains, as well as facilitating foreign trade. IDB Lab, the IDB Group’s innovation laboratory, focused its support on the use of sustainable agricultural technologies and practices, ecotourism, financial inclusion, training, and employment.
Valeska Fonseca
Associate
García & Bodán
Nicaragua