Short-term strength – but watch out for challenge ahead
Costa Rica’s February 1 elections showed that voters favored continuity, as Laura Fernández, presidential candidate of the party aligned with President Rodrigo Chaves, won the race. The implications for the economic outlook will be analyzed in these and subsequent reports. The complexity of turbulent international conditions and prospects for significant changes in the global economy will impact the country with lower economic growth in 2026 and 2027. That didn’t occur in 2025, as was generally expected for circumstantial reasons. Internally, the direction of relevant economic policies remains uncertain, and cannot be inferred from the previous four years, because the new government will enjoy an absolute majority in Congress, enough to modify legislation to implement their policies. Real economic growth is forecast at 3.7% y/y in 2026 and 3.5% in 2027. The external sector will decelerate somewhat, with only a modest increase of the current account deficit, and a comfortable stock of international reserves. The preliminary assessment of public finances foresees global and primary balances very similar to last year, with public debt slightly below the threshold of 60% of GDP. We expect few changes in the evolution of inflation and the FX market.
The Salvadoran economy seems to be performing well in the short run; that is the focus of our semiannual forecasting exercises. But medium and long-term challenges persist. The main one is the structural transformation of the economy to impress dynamism on economic activity, so as to move from its current state as a medium-income regional country toward a high-income one, like Panama and Costa Rica. Although 2025 performance was good, there remain some short-term issues to be addressed, to maintain the confidence of the international financial markets, and to maintain open channels with multilateral financial institutions. Once satisfactory progress has been made with U.S. relationships, those with the IMF that look stuck should improve soon, to convince the international community of El Salvador’s commitment to a good economic program.
Guatemala begins 2026 with strong economic momentum, supported by stronger export performance, robust remittance inflows, low inflation and improving business confidence, all of which continue to sustain private consumption, the country’s main growth driver. Monetary conditions remain supportive following a recent policy rate cut, while currency stability and favorable U.S. economic prospects provide an additional external anchor. But political and institutional risks persist, as governance challenges, reform resistance and structural issues such as informality and dependence on remittances continue to weigh on long-term transformation. Overall, Guatemala maintains a stable macroeconomic environment with favorable conditions for gradual improvement, although political uncertainty remains a key risk in coming months.
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