PUERTO RICO:
The economy remains in weak shape amid high public debt and the fallout from Hurricanes Maria and Irma. On 24 January, the government released a revised five-year fiscal plan. It includes subsidy cuts, reforms to build a more centralized government procurement system and measures to boost tax collection. Despite all of this, the plan projects the government will remain in a fiscal deficit position until FY 2022. In response, Puerto Rico’s financial oversight board requested amendments
on 5 February, calling for more details on policy changes and the inclusion of an emergency disaster fund. Meanwhile, under a U.S. federal disaster recovery package approved on 9 February, Puerto Rico will receive a USD 16 billion financial lifeline, which will help support dwindling Medicaid
funding and ongoing infrastructure rebuilding efforts.
The devastation caused by Hurricanes Maria and Irma is expected to keep the economy in recession this fiscal year, as are U.S. federal tax changes agreed in December. For FY 2018, our panelists estimate that GNP will contract 4.5%, which is down 2.7 percentage points from last month’s forecast. For FY 2019, GNP is expected to grow 1.6%.
Inflation decelerated from 1.2% in November to 1.1% in December. Our panelists expect inflation to average 2.8% in 2018 and 2.4% in 2019.
HAITI
While the economy started 2017 on a solid footing, economic activity decelerated in the second half of the year, mostly due to the negative impact of Hurricanes Harvey and Irma. Although the recovery is expected to strengthen in the coming years, the U.S. administration’s recent
decision to scrap Temporary Protected Status (TPS) for Haitians as of July 2019 threatens all-important remittance inflows, which account for around 34% of the country’s GDP. As a result of this decision, around 60,000 Haitians currently living in the U.S. could be forced to return to
Haiti.
• Economic growth is expected to gather steam this year on the back of higher government spending on reconstruction and healthy global growth. That said, high poverty levels and the sustained possibility of seasonal hurricanes remain key downside risks to the economic outlook.
FocusEconomics panelists foresee growth of 2.5% in 2018, which is up 0.1 percentage points from last month’s forecast. The panel expects the economy to expand 2.7% in 2019.
• Inflation fell from November’s 13.7% to 13.3% in December, the lowest print since October 2016. Panelists see inflation moderating to 12.4% by the end of 2018 and declining further to 9.8% by the end of 2019.
BELIZE
Weak trade data for the fourth quarter suggests the economy continued limping along in the final stretch of last year; growth had slowed considerably in the third quarter, held back by weak agricultural and manufacturing output. In both November and December, exports fell
year-on-year by double digits as shipments of marine and citrus products decreased, hinting that subdued activity in the agricultural sector persisted through year-end. Full-year exports, on the other hand, recovered as sugar revenues soared on stronger harvests and higher prices.
Agricultural output is expected to continue recovering this year, underpinning household spending. Moreover, healthier inbound tourism should benefit from the strength of the global economy and, in turn, boost fixed investment. Fiscal imbalances, including external obligations and
the massive public debt, are expected to limit growth over the medium term. FocusEconomics panelists see growth of 2.1% in 2018, down 0.1 percentage points from last month’s estimate, and 1.9% in 2019.
Inflation ticked up to 1.0% in December (November: 0.9%) on higher prices at the pump. Our panelists expect inflation to average 1.8% in 2018 and 2.0% in 2019.
NICARAGUA
The economy lost puff in the third quarter according to recent data, following a strong start to 2017. Growth was 3.2% year-on-year, dampened by a fall in exports of key agricultural products and transport services.
On the other hand, public and private consumption were fairly robust. Signs for Q4 are positive; in November, year-on-year economic activity growth picked up, while remittances surged from a year ago, likely thanks to a dynamic U.S. labor market. At the end of January, the government
announced measures to rationalize electricity subsidies and reduce VAT exemptions. However, in a recent staff visit the IMF urged Nicaragua to go further in strengthening the fiscal position, in particular by putting the Social Security Institute on a sustainable long-term financial footing.
• Growth should be brisk this year, thanks to strong public infrastructure investment and private consumption growth. Risks are mainly tilted to the downside due to financial problems at the Social Security Institute, lower financing from Venezuela and the possible passage of the NICA Act in
the U.S. Analysts expect GDP to grow 4.5% in 2018, unchanged from last month’s forecast, and 4.4% in 2019.
• Inflation dipped from 5.7% in December to 5.4% in January. Our panelists expect inflation to end 2018 at 5.1% and 2019 at 5.5%.
HONDURAS
Incumbent Juan Orlando Hernández was sworn in as president on 27 January amid widespread protests and clashes with police. Demonstrators insist that Hernández stole the 26 November election when he won the vote by a slim margin against Opposition Alliance candidate Salvador
Nasralla. He had previously trailed by five percentage points—a statistically improbable comeback that followed voting irregularities. Reactions were mixed; U.S. leaders congratulated the president, while the Organization of American States called for new elections. Furthermore, the political
crisis threatens to upend the economy’s recent growth streak, which most recently notched strong export-led economic growth in the third quarter— economic activity slowed to a 10-month low in November.
• Strong U.S. remittances, along with an upbeat agricultural sector, should support household spending this year. Moreover, agricultural and manufacturing exports should remain robust. That said, investor confidence has been shaken in recent months, and the direction of U.S. immigration policy is weighing on the outlook. Our panelists expect GDP growth of 3.7% in 2018, unchanged from last month, and 3.8% in 2019.
• Inflation ticked down to 4.6% in January (December: 4.7%). Our panelists expect inflation to end 2018 at 4.1% and 2019 at 4.3%.
JAMAICA:
The economy is on the mend, with the Statistical Institute’s measure of the unemployment rate dipping in October to a nine-year low and down sharply from July. Labor market improvements were most marked for women, with female employment surging year-on-year. In addition,
tourism numbers rose at a robust pace in 2017 thanks to a greater number of U.S. visitors. On the downside, the trade deficit widened significantly in the year to November despite strong export growth, due to greater fuel imports. At the end of January, Fitch Ratings revised its
outlook on Jamaica’s long-term debt to positive, citing the ameliorating macroeconomic and fiscal positions. This comes after growth in Q3 strengthened thanks to the manufacturing and service sectors.
The recovery should gather pace this year due to international support, healthy global growth and positive spillovers from the government’s reform agenda. However, high public debt levels, pricier oil imports and a potential lack of progress on public-sector wage negotiations pose downside risks. FocusEconomics panelists expect 1.9% growth in 2018, down 0.1 percentage points from last month’s forecast, and 2.3% in 2019.
• Inflation was 5.2% in December (November: 5.0%). Our panel projects that inflation will close 2018 at 5.2% and 2019 at 5.5%.
FOCUS ECONOMICS - https://www.focus-economics.com/- Desde Barcelona - España
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