The economic crisis caused by COVID-19 would cause a 4% contraction in Central America

The Central American Institute for Fiscal Studies (Icefi), based in Guatemala, warned on Tuesday that the economic crisis generated by the COVID-19 pandemic could generate an economic contraction of 4.0% in the growth of the isthmus.

In a virtual forum, the Icefi projected four possible scenarios that they have analyzed derived from the consequences of social distancing, the drop in oil, the drop in tax collection and the special emergency fiscal measures applied.

The worst case scenario could trigger negative growth of 4.0% -the same for each of the six countries of the isthmus-, especially derived from the paralysis of economic activity last month, in the Central American region.

But in the best of the crisis scenarios, the region could expect positive growth of 1.5%, with Panama being the country with the best figures (2.6), followed by Honduras and Guatemala (1.8), Costa Rica and El Salvador (1.8) and Nicaragua, with 0.3%.

Icefi concluded in its research, based on recent estimates by the International Monetary Fund, that there will be a "bleak scenario for the region, characterized by an economic recession in all countries, as well as an increase in public debt and the fiscal deficit, with sustainability risks and fiscal vulnerability ", in the words of the entity's economist, Ricardo Barrientos.

The institution also calculated a high impact on social welfare and economic development due to "social inequality in access to health systems, protection and social assistance, as well as support measures for micro, small and medium-sized enterprises" .

To these factors are added "usual unemployment and poverty, the loss of production capacity for internal and external consumption; and the maintenance (or not) of democratic governance," said the institute.

LOSS OF JOBS

The Icefi identified as determining factors of the economic crisis the decrease of "a third in tourism income, a 20% decrease in the flow of family remittances and, therefore, consumption; a 20% decrease in exports and a total closure of the economy for four weeks. "

The scenarios analyzed by the Icefi show "a significant loss of jobs", which, in the worst of the possibilities studied, could cause around 1.9 million missing jobs in the six countries of the isthmus, which is why it recommended addressing the " phenomenon of "unemployment" urgently. "

The entity recommended "the urgent need for fiscal pacts to order public finances", in order to "facilitate actions aimed at guaranteeing more sustainable growth"; and they also suggested "the creation of a broader social protection floor to guarantee the well-being of the entire population."

Icefi further promulgated that the "role of the State (in the countries of the region) should be strengthened", advised "to advance in the implementation of the 2030 Agenda for sustainable development", and also "to adopt a scheme of preferably shared responsibilities".

According to data from the World Health Organization, Central America has registered a total of 7,642 positive cases of the SARS-CoV-2 coronavirus, of which 250 have died, while globally the pandemic amounts to almost three million people infected and close 200,000 deaths.