Central American Bank for Economic Integration Chief Economist Office

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Central American Bank for Economic Integration Chief Economist Office

The monthly economic outlook report presents an ad hoc analysis of the macroeconomic performance of the world in general and in particular. The process to prepare this report was coordinated by Dr. Florencia Castro Leal, Chief Economist of CABEI. The research and writing were the responsibility of Miguel Angel Medina Fonseca (Economist) and was reviewed by Armando Enrique Navarrete (Senior Economist). The English translation was done with the collaboration of CABEI's Administrative Services and Institutional Procurement Department and the revision of Carmen Elisa Méndez (Junior Economist).

The contents of this publication are the responsibility of the authors and do not necessarily reflect the official position of CABEI.

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Central American Bank for Economic Integration Chief Economist Office

TABLE OF CONTENTS

I. COVID-19 INFECTIONS INCREASED IN RECENT WEEKS, WHILE VACCINATION PLANS MOVE FORWARD...... 4

II. GLOBAL ECONOMIC GROWTH PROSPECTS STRENGTHEN AND THE OUTLOOK FOR 2021 IS POSITIVE ...... 6

III. ECONOMIC ACTIVITY IN CENTRAL AMERICA IS RECOVERING AND WITH IT EMPLOYMENT, AND FISCAL REVENUES ARE INCREASING IN SOME COUNTRIES...... 10

ANNEX 1. LONG TERM FOREIGN CURRENCY SOVEREIGN DEBT RATING ...... 18

REFERENCES ...... 19

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Central American Bank for Economic Integration Chief Economist Office MONTHLY ECONOMIC OUTLOOK REPORT FOR APRIL 2021.

I. COVID-19 INFECTIONS INCREASED IN RECENT WEEKS, WHILE VACCINATION PLANS MOVE FORWARD

1. New confirmed cases of COVID-19 worldwide have increased in recent weeks. The virus has infected about 1.9% of the world's population, with a mortality rate of 2.1%. New daily cases increased by an average of 59.4% during the last month ending on April 211, with consecutive increases during the last 9 weeks (fourth wave for some countries). In countries that have advanced in their vaccination plan, such as the , it is mainly affecting the population in the 30- to 50-year-old age group. This led several countries to reestablish measures to contain the spread of the virus, such as the closedown of schools and businesses, and curfews. This rebound occurred during delayed vaccination plans, population fatigue due to restrictions and relaxation in the application of biosecurity measures, as well as the appearance of new variants of the virus that are more aggressive.

2. The trend of new infections shows mixed results among the most affected countries during the last month.2 In this regard, India, , Iran, , , , the and have upward trends in new confirmed cases of infections in the world during the last week. For their part, the United States, Brazil, , , , Ukraine, the , Canada and Russia registered a downward trend. Finally, in Central America, Costa Rica and registered rises in daily confirmed cases during April, marking new highs since the beginning of the pandemic.

Graph 1. Evolution of new COVID-19 daily cases (7-day moving average).

Selected countries and zones Regional Members of CABEI Non-Regional members of CABEI

Source: Our World in Data. Coronavirus (COVID-19) Vaccinations, April 22, 2021.

3. Vaccination plans continue to progress at different speeds, although slower than expected. Among the countries with the most significant advances in the application of full doses of the COVID-19 vaccine are Israel with 57.8% of the population, followed by the United Arab Emirates (38.8%), Chile (30.0%), the United States (26.2%), the United Kingdom (15.9%), and further behind the European Union (7.3%). CABEI member countries

1Chief Economist Office with Our World in Data Information. Coronavirus (COVID-19) Vaccines as of April 22th. Chief Economist Office with information from John Hopkins Coronavirus Resource Center and Woldometer as of April 22th. 4

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Central American Bank for Economic Integration Chief Economist Office include Spain (7.7%), the Dominican Republic (5.5%), Costa Rica (4.9%), Panama (4.1%), (3.5%), Colombia (2.4%) and Argentina (1.8%) Since the percentage of the total population that has received all the prescribed doses, according to the vaccination protocol, is not available for all countries, a graph with the cumulative dose per 100 persons is presented below.

Graph 2. Cumulative doses of COVID-19 vaccines applied per 100 persons1.

Selected countries and zones Regional members of CABEI Non-regional members of CABEI

Source: Our World in Data. Coronavirus (COVID-19) Vaccinations, April 22, 2021.

4. Fourteen COVID-19 vaccines have been approved as of the third week of April, amid confirmation of side effects from two of these. The most approved vaccines worldwide are from AstraZeneca/Oxford, (Vaxzevria in the European Union)3, Pfizer/BioNTech, Gamaleya, Moderna and Johnson & Johnson, which have been registered in 91, 83, 62, 46 and 40 countries, respectively4. The European Medicines Agency found a link between AstraZeneca's vaccine and the occurrence of unusual blood clots with a low level of platelets in the blood, which should be listed as very rare side effects of its application. It also informed that most of the reported cases had occurred in women under 60 years of age within two weeks of vaccination. However, it confirmed that the overall benefit-risk ratio remains positive5. This situation has led some countries such as Germany and France, among others, to consider administering another vaccine to those who were due for a second dose of the vaccine. For the same reason above, the use of Johnson & Johnson's vaccine was also suspended as a precaution in the US, European Union and South Africa6.

5. The COVAX7 Mechanism reported that there are delays in the delivery of vaccines. Deliveries of COVID-19 vaccines produced by the Serum Institute of India (SII) known as COVISHIELD, and which are destined for low- income economies participating in the COVAX Mechanism, were delayed in March and April, a situation that It could be extended until June, since the Government and the SII, given the rebound of COVID-19 in their country, have prioritized the needs of their population until the cases begin to decline8.

3 Deutsche Welle (DW). 4 COVID-19 Vaccine Tracker. 5 European Medicines Agency. 6 BBC Mundo News. 7 COVID-19 Vaccines Global Access. 8 World Health Organization and Global News. 5

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Central American Bank for Economic Integration Chief Economist Office II. GLOBAL ECONOMIC GROWTH PROSPECTS STRENGTHEN AND THE OUTLOOK FOR 2021 IS POSITIVE

6. The most recent estimates for world economic growth show a slower decline in 2020 and a stronger rebound in 2021. The International Monetary Fund forecasts a world economic growth of 3.3% for 2020 (-3.5% in January 2021) and a greater rebound in 2021 with 6.0% (5.5% in January 2021). It also pointed out that the contraction in activity in 2020 was unprecedented due to the speed and timing of the contraction, and that the policy response of governments prevented the recession from being up to three times larger.

7. Looking ahead, the main challenge will be avoiding divergence in per capita income and rising inequality between countries. The recovery is expected to be heterogeneous across regions and countries of the world, with emerging market economies and low-income developing countries suffering the greatest losses in the medium term. On the other hand, developed economies will be the first to recover their pre-crisis GDP levels as they move forward with their vaccination plans, although there is some lag in the Euro Zone in general and Spain in particular. CABEI member countries that handled the crisis better in 2020 were Taiwan, which recorded positive economic growth, and Korea, which suffered a slight contraction with prospects of surpassing its pre- crisis GDP levels in 2021. Finally, the progress of the economic recovery will depend to a large extent on the trajectory of the health crisis linked to advances in vaccination plans.

Graph 3. Economic growth estimates 2020 and 2021 (percentages) and cumulative rates (percentage points).

2020 2021 Acumulado 8.4 6.0 6.4 6.4 4.9 4.7 4.4 3.6 2.3 3.1

-1.0 -3.3 -3.4 -3.5 -6.6

-11.0 Mundo Zona Euro ASEAN-5 EE. UU. España Taiwán Corea Note: The light blue dots are the sum of 2020 and 2021 growth rates, when placed above zero it indicates that in 2021 the 2019 GDP is exceeded otherwise it would be after that year. Source: Chief Economist Office with information from the World Economic Outlook. April 2021 International Monetary Fund.

8. The United States consolidates its economic recovery at the close of the first quarter of 20219. The path of the U.S. economic recovery has strengthened in recent months, driven by the progress in the vaccination plan that allowed the relaxation of pandemic-related measures, and by the implementation of the USD 1.9 billion

9 The United States is studied in detail because it is one of the most relevant economies worldwide, and the main destination of exports (39% in 2018) and migrants (77.9% in 2017) from Central America, and therefore the most important country of origin of .

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Central American Bank for Economic Integration Chief Economist Office fiscal stimulus package as of mid-March 10. The following are some short-term indicators of the U.S. economy, which evidence the U.S. economic recovery in the first quarter of 2021.

− increased at an annualized rate of 4.3% in the fourth quarter of 2020, according to the third estimate by the Bureau of Economic Analysis. Momentum in the latest quarter came from increases in exports, residential and nonresidential fixed investment and private inventories, and personal consumption expenditures, which were partially offset by declines in public spending and higher imports.11

− The weekly economic index registered growth on March 20, after 52 weeks falling. This behavior continued in the following month and increased 11.2% in the week ending April 17, 2021. Likewise, the 13-week moving average reached, for the third consecutive week, a positive result of 2.54% as of April 1712.

− The variation of industrial production index returned to the positive quadrant with a year-on-year increase of 1.0% in March 2021, after falling in the previous two months, and registering the largest month-on-month drop (-2.2%) for the second month of the year since that observed in 1975 (-2.3%). The severe winter weather in the south-central region of the country in mid-February was the main cause of the declines in production for the month13.

− Personal disposable income and personal consumption fell 8.0% and 1.0% in February 2021 from January14, due to declines in economic impact payments associated with the Coronavirus Relief and Response Supplemental Appropriations Act, and restrictions and closures in some areas of the country.

− Total nonfarm employment increased by 916.0 thousand in March, thereby lowered the overall unemployment rate to 6.0% (6.2% in February) and the Latino unemployment rate to 7.9% (8.5% in February), reflecting the continued resumption of economic activity and the easing of pandemic-related restrictions. Employment growth was broad-based across all nonfarm activities during March, led by increases in leisure and hospitality, public and private , and construction15. In turn, initial applications for unemployment benefits reached 547,000 in the week ending April 17, 2021 (39,000 less than the previous week). This was the lowest level observed since March 14, 2020 (256,000)16.

− In this context, the U.S. Federal Reserve maintained its accommodative monetary policy, with no changes in the interest rate, which remained between 0.0% and 0.25%, despite the inflationary rise in March (1.6%), in order to sustain the recovery of the economy and employment in the coming months.

10 This package was approved by the U.S. Congress on March 10, 2021. 11 Bureau of Economic Analysis. News release: Gross Domestic Product, Fourth Quarter and Year 2020 (Third Estimate). 12 The Weekly Economic Index (WEI) is an index of ten daily and weekly indicators of real economic activity, scaled to align with the four- quarter GDP growth rate. It represents the common component of a series covering consumer behavior, the labor market and production. 13 Federal Reserve. Industrial Production and Capacity Utilization. 14 Bureau of Economic Analysis. Personal Income and Outlays. 15 Bureau of Labor Statistics. Economic news release: Employment situation summary. 16 United States Department of Labor. Unemployment insurance weekly claims, Seasonally Adjusted Data. 7

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Central American Bank for Economic Integration Chief Economist Office

Graph 4. U.S. Weekly Economic Index (year-over-year Graph 5. USA.: Total and Latino unemployment (percent). change, percentages).

16.0

11.2 Total Latino 12.0 18.9 8.0 17.6

4.0 2.54 14.5 0.0 12.9 14.7 -4.0 13.3 10.5 10.3 9.3 8.8 8.6 8.5 11.1 8.4 7.9 -8.0 10.2 6.0 8.4 -12.0 4.4 7.9 WEI WEI 13 semanas 4.3 6.9 6.7 6.7 6.3 6.2 6.0 -16.0 4.4

3.6 3.5

0 8 . 0 2 . 2 0 2 2 . 0 2 . 2 0 0 7 . 0 3 . 2 0 2 1 . 0 3 . 2 0 0 4 . 0 4 . 2 0 1 8 . 0 4 . 2 0 0 2 . 0 5 . 2 0 1 6 . 0 5 . 2 0 3 0 . 0 5 . 2 0 1 3 . 0 6 . 2 0 2 6 . 0 9 . 2 0 1 0 . 1 0 . 2 0 2 4 . 1 0 . 2 0 0 7 . 1 1 . 2 0 2 1 . 1 1 . 2 0 0 5 . 1 2 . 2 0 1 9 . 1 2 . 2 0 0 2 . 0 1 . 2 1 1 6 . 0 1 . 2 1 1 1 . 0 1 . 21 0 8 . 0 1 . 22 0 5 . 0 1 . 20 0 1 . 0 2 . 2 0 1 5 . 0 2 . 2 0 2 9 . 0 2 . 2 0 1 4 . 0 3 . 2 0 2 8 . 0 3 . 2 0 1 1 . 0 4 . 2 0 2 5 . 0 4 . 2 0 0 9 . 0 5 . 2 0 2 3 . 0 5 . 2 0 0 6 . 0 6 . 2 0 2 0 . 0 6 . 22 0 7 . 0 6 . 20 0 4 . 0 7 . 21 0 1 . 0 7 . 21 0 8 . 0 7 . 22 0 5 . 0 7 . 20 0 1 . 0 8 . 20 0 8 . 0 8 . 21 0 5 . 0 8 . 22 0 2 . 0 8 . 22 0 9 . 0 8 . 20 0 5 . 0 9 . 21 0 2 . 0 9 . 21 0 9 . 0 9 . 2 0 0 3 . 1 0 . 2 0 1 7 . 1 0 . 2 0 3 1 . 1 0 . 2 0 1 4 . 1 1 . 2 0 2 8 . 1 1 . 2 0 1 2 . 1 2 . 2 0 2 6 . 1 2 . 2 0 0 9 . 0 1 . 2 1 2 3 . 0 1 . 23 1 0 . 0 1 . 20 1 6 . 0 2 . 21 1 3 . 0 2 . 22 1 0 . 0 2 . 22 1 7 . 0 2 . 20 1 6 . 0 3 . 21 1 3 . 0 3 . 22 1 0 . 0 3 . 22 1 7 . 0 3 . 20 1 3 . 0 4 . 21 1 0 . 0 4 . 21 1 7 . 0 4 . 2 1 0 4 . 0 1 . 2 0 E.20 F.20 M.20 A.20 M.20 J.20 J.20 A.20 S.20 O.20 N.20 D.20 E.21 F.21 M.21 Source: Office of the Chief Economist with data from US Bureau of Labor Statistics, Federal Reserve Bank of St. Louis.

9. In CABEI's non-regional member countries, economic recovery continues to be evidenced in the economic indicators. Most countries recorded higher than in the previous month, although inflation remained low in most cases, allowing monetary policy rates to remain low and stable in order to boost aggregate demand. At this moment, inflation is considered by experts as the clearest indicator of economic recovery. Industrial production indices continued to grow in Argentina, Korea and Taiwan, and fell at lower rates in Colombia, Spain and Mexico. Finally, unemployment decreased in most countries and in the case of Taiwan it increased marginally to 3.70% in February 2021 (3.66% in the previous month).

Table 1. Selected economic indicators of CABEI's extra-regional member countries. Variables Unit of measure Argentina Δ Colombia Δ Korea Δ Spain Δ Mexico Δ Taiwan Δ

Mar.2021 Mar.2021 Mar.2021 Mar.2021 Mar.2021 Mar.2021 interannual Inflation variation, percentage 42.60 + 1.51 - 1.50 + 1.30 + 4.67 + 1.26 -

Apr.2021 Apr.2021 Apr.2023 Apr.2025 Apr.2027 Apr.2029 Monetary Policy Rate percentage 38.00 = 1.75 = 0.50 = -0.50 = 4.00 = n.d.

Feb.2021 Feb. 2021 Feb.2021 Feb.2021 Feb.2021 Feb.2021 Industrial Production interannual Index variation, percentage 1.60 - -6.20 + 1.00 - -3.40 + -4.51 + 2.96 -

IV.T 2020 Feb.2021 Mar.2021 IV.T 2020 Feb.2021 Feb.2021 Unemployment percentage 11.00 - 15.90 - 4.30 - 16.13 - 5.36 - 3.70 +

Note: Spain’s MPR is the Euro Zone deposit facility rate and in the Republic of Korea it corresponds to Base Rate. The symbol Δ is = if the variable remained unchanged, + if it increased and - if it decreased, all with respect to the previous month. n.a. is for not available. Source: Prepared by the Office of the Chief Economist with information from the central banks and statistical institutes of each country.

10. The evolution of equity markets after some declines in March resumed their upward trend in the first days of April 2021. This behavior is largely due to the economic recovery of the United States in recent weeks, driven by the progress of the vaccination plans and the reopening of the economy, which was reflected in the decrease in the unemployment rate, although downside risks associated with the proposed increase in the corporate

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Central American Bank for Economic Integration Chief Economist Office rate (from 21% to 28%) to finance the U.S. government's plan valued at USD 2.3 trillion persist, as well as the escalation of long-term interest rates17.

11. Standard and Poor´s ratified 's long-term sovereign debt rating and raised Taiwan's. S&P maintained its rating at B- and with a stable outlook, in view of the expectation that El Salvador will continue to receive external support in 2021, in the face of a deteriorating fiscal situation, which will provide liquidity and limit the risk of refinancing the sovereign debt in the next 12 to 18 months18. On the other hand, S&P raised Taiwan's rating to AA (from AA-), and improved the outlook to positive, which incorporates the expectation that the Taiwanese economy would maintain good growth in the medium term, supported by strong external demand of electronic products19.

12. The price of oil rose, the price of gold fell, and the prices of Central America's main export goods increased in March 2021. The average price of oil closed at USD 62.4 per barrel, doubling the price of a year ago, which reflects the increased demand for this commodity due to the global economic recovery. However, during the month there were several events that generated volatility in the price, the most outstanding being the blockage of the Suez Canal after the Ever-Given cargo ship was stranded diagonally due to strong winds, a situation that lasted for almost a week and pushed the price up20. At the other extreme, the decision of some European countries to preventively suspend the use of AstraZeneca's coronavirus vaccine21, together with the new containment measures implemented in some regions of Europe, had an impact on the lower price of crude oil. In April, the price recovered despite the announcement by OPEC and its allies (OPEC+) to gradually increase production over the next three months starting in May22. Meanwhile, the average price of gold was USD 1,718.2 lower by 5% than in February, among the main events that caused this behavior were: the approval of the fiscal stimulus package in the US, which generated positive expectations of economic recovery; which generated positive expectations of economic recovery; the search for liquidity by investors in the face of the rebound of COVID-19 contagions in some regions of the world, in order to cover margins due to the fall of the stock markets, the losses in the prices of other raw materials and to seek refuge in hard currency23. Finally, the average prices of Central America's main export products recorded month-on-month and year-on-year growth (except for shrimp), a trend that, if it continues, would benefit the regional export sector.

17 Daily Fx. The S&P 500 breaks record at the start of the week after the NFP, but faces serious short-term risks 18 S&P Global Ratings. Press Release. 19 Reuters. S&P raises Taiwan ratings, says outlook positive. 20 BBC News. Suez Canal: The Ever Given freighter is completely disentangled after almost a week of blocking traffic. 21 Daily Fx. Oil price falls due to preemptive suspension of AstraZeneca's vaccine in Europe. 22 Organization of the Petroleum Exporting Countries. 15th OPEC and non-OPEC Ministerial Meeting concludes. 23 Price of gold. Reuters News. 9

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Central American Bank for Economic Integration Chief Economist Office

Table 2. International prices of main Central American goods.

Precio promedio Unidad de Variación Producto marzo 2021 medida Mensual Interanual

Petroleo crudo (WTI) 62.4 USD/barril 5.6 108.7

Oro 1,718.2 USD/onzas troy -5.0 7.9

Café arábiga 3.7 USD/kg 0.4 12.6

Banano 1.2 USD/kg 0.3 2.6

Carne vacuna 4.7 USD/kg 1.2 5.5

Aceite de palma 1,031.1 USD/Tm1 1.1 62.1

Camarón 12.3 USD/kg 2.9 -12.3

Azúcar 0.7 USD/kg 2.6 12.5

Note: 1/ MT is metric ton. Source: Office of the Chief Economist with information from the .

III. ECONOMIC ACTIVITY IN CENTRAL AMERICA IS RECOVERING AND WITH IT EMPLOYMENT, AND FISCAL REVENUES ARE INCREASING IN SOME COUNTRIES.

13. The updated projections of the main international organizations foresee a greater drop in economic growth in 2020 and a more robust recovery in 2021. The World Bank and the International Monetary Fund improved their economic forecasts for Latin America and the Caribbean in 2021, but point out the risks that could dampen them, such as the fiscal challenge and the inequalities faced by the region -- the "hardest hit in the world" by COVID-19 --, and highlight the divergence in recovery among the countries of the world. In Central America, although a greater fall in GDP is estimated for 2020, at the country level a revision was made towards smaller declines in Belize, Guatemala, El Salvador, and Costa Rica. In turn, economic growth projections for 2021 were updated upward in most countries, except for Belize and .

Graph 6. 2020 and 2021 economic growth estimates (percentages) and cumulative rates (percentage points).

2020 2021 Acumulado 9.9 6.4 4.5 5.5 5.0 4.5 3.6 4.1 2.6 1.9 0.9

-1.8 -2.5 -4.6 -6.7 -6.8 -8.2 -8.6 -9.0 -10.0 -14.1 -17.9 BLZ GTM SLV HND NIC CRI PAN DOM ARG COL MEX Source: Office of the Chief Economist with information from Renewing with Growth. LAC Semiannual Report; April 2021. World Bank.

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Central American Bank for Economic Integration Chief Economist Office

Graph 7. 2020 and 2021 economic growth estimates (percentages) of the IMF and cumulative rates (percentage points).

2020 2021 Acumulado 12.0 5.8 4.5 4.2 4.5 5.5 5.2 5.0 1.9 2.6 0.2

-1.5 -3.0 -4.8 -6.7 -8.0 -6.8 -8.2 -8.6 -10.0 -14.1 -17.9 BLZ GTM SLV HND NIC CRI PAN DOM ARG COL MEX

Source: Chief Economist Office with information from the World Economic Outlook. Global economy on firmer ground, but with divergent recoveries amid high uncertainty. April 2021 International Monetary Fund.

14. The economic impact of the pandemic has meant a setback of almost a decade in terms of GDP per capita, returning to 2011 levels. In CABEI member countries located in Latin America and the Caribbean (LAC), the decline in GDP per capita averaged 9 years. The economic loss due to the pandemic, measured by GDP per capita at constant 2020 prices, was in the range of 3 to 28 years, as shown in Figure 8, with the Dominican Republic registering the smallest setback (3 years) and Belize being the most affected (28 years). In terms of GDP at constant prices, the decline averaged 5 years24. The range was between 2 and 11 years, with Guatemala being the least affected (2 years) and Argentina the most affected (11 years).

Graph 8. Decline in the levels of GDP per capita and GDP at constant prices (number of years).

Source: Chief Economist Office with information from the World Economic Outlook. April 2021 International Monetary Fund.

15. Looking ahead, linked to the positive outlook for economic growth in 2021, recovery to the pre-crisis GDP per capita level is expected to be achieved by 2023 in most countries25. Economic recovery for CABEI member countries located in LAC would be in the range of 2 to more than 6 years, as shown in Figure 9, with Guatemala, El Salvador and the Dominican Republic having the earliest recovery (2 years), and Belize and Argentina having

24 With each country's estimate of constant 2020 GDP and GDP per capita, the gap was calculated with respect to the year in which similar values had been reported in the past. 25 With each country's estimate of GDP and GDP per capita constant for 2019, the number of years in the future in which they would reach similar values, starting from 2020, was calculated. 11

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Central American Bank for Economic Integration Chief Economist Office the slowest recovery (more than 6 years). In terms of the level of GDP at constant prices, recovery to pre-crisis values would be achieved in 3 years on average. The range would be between 1 and 5 years, with Guatemala being the fastest (1 year) and Belize the slowest (5 years).

Graph 9. Recovery to pre-crisis levels of GDP per capita and GDP at constant prices (number of years).

Note: In Belize and Argentina the recovery of GDP per capita is after 2026 (latest projected year available). Source: Chief Economist Office with information from the World Economic Outlook. April 2021 International Monetary Fund.

16. Economic activity showed a positive trend in most countries. The monthly economic activity index (MAEI) by groups, show in some countries a higher productive activity in manufacturing industry, commerce, and information and communication activities according to the last available month, while agricultural activities, transportation, hotels, restaurants and other service activities still show negative rates. At the aggregate level, the inter-annual variation of the MAEI of Guatemala (3.5%) maintained an upward trend in February 2021, and the Dominican Republic (0.8%) reported its first growth since the crisis began. While, Honduras (-6.0%) and Costa Rica (-4.7%) in February and Panama (-11.9%) in January fell at a lower rate. El Salvador (-2.5%) also reduced its decline in January and Nicaragua (0.1%) registered a slight deceleration in December 2020.

17. Unemployment rates continue to fall in most countries. In Costa Rica, the overall unemployment rate was 18.5% (expanded unemployment 19.9%26), with higher unemployment prevailing among the urban population (19.8%), young people aged 15 to 24 (42.6%) and among women (25.0%) during the quarter ending February 27 28 2021 F . Furthermore, the variation in the number of contributors to social security in the Dominican Republic was -7.7% in February 202129 (compared to -13.2% in January) and in Costa Rica -2.4% in February 202130 (compared to -2.8 % in January); while in El Salvador it registered -4.2% in January 202131 (versus -4.1% in December 2020) and in Guatemala it was -1.2% in January 202132 (versus 1.9% in December 2020).

26 Percentage that includes in the work force the population that is not part of the work force that is available and discouraged. 27 Instituto Nacional de Estadísticas y Censos de Costa Rica. Continuous Employment Survey, quarter December 2020 to February 2021. 28 Last month available in each country divided by the value of February. 29 Superintendence of Pensions of the Dominican Republic. 30 Costa Rican Social Security Agency. 31 Salvadoran Institute of Social Security (ISS). 32 Ministry of Economy of Guatemala. 12

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Central American Bank for Economic Integration Chief Economist Office

18. The increase in economic activity and the increase in international oil prices influenced the recent upturn in inflation, nevertheless the monetary authority maintained its policy interest rates. The region's central banks kept their monetary policy rates unchanged in April 2021. On the other hand, the inter-annual variation of the consumer price index in March decreased in Guatemala (5.84%) with respect to the previous month and increased in Costa Rica (0.47%). The Dominican Republic registered inflation of 8.30% and core inflation of 5.58%, above the upper limit of the established target range; in Honduras inflation was 3.94% higher than the previous month with a variation of the core inflation (4.43%) within the tolerance range; Nicaragua also registered rising inflation (4.11%); and in El Salvador there was an inter-annual inflation of 1.77% for the third month in a row, after seventeen months with negative rates. Finally, in Panama inflation registered a negative rate for the twelfth consecutive month in February 2021.

19. Exports grew positively or fall less in most Central American countries. The greater dynamism of international trade helped most of the countries in the region to maintain the positive momentum in their accumulated exports, in this sense El Salvador (1.1%) and Costa Rica (10.8%) grew as of February 2021 and Guatemala (7.9%) in January. However, these fell in Honduras (-12.9%) in January and in the other countries as well, although at lower rates than the previous month, this is how Panama registered -6.4% in January; and the Dominican Republic -8.0% and Nicaragua -4.8% both as of December 2020.

20. Imports registered positive changes in some countries at the beginning of the year, although most of them showed negative behavior. El Salvador (9.8%) and Costa Rica (4.5%) continued to register positive year-on-year growth rates in their imports accumulated as of February, being higher than those of the previous month. In the rest of the countries the fall was less than the previous month, in Guatemala (-1.9%), Honduras (-5.2%) and Panama (-16.5%) in January, and Nicaragua (-4.3%) and the Dominican Republic (-15.9%) to December. In summary, imports have fallen by a greater magnitude than exports, which is reflected in the lower trade deficits achieved in most of the countries of the region compared to the same period of the previous year (except in El Salvador and Honduras).

21. Remittances grew in all countries as of February 2021, however, they showed mixed monthly trends. Monthly remittances from most countries grew at a lower rate in February, except for Guatemala, which registered a variation greater 16.7% (8.7% in January). However, most countries reported double-digit increases. On the other hand, it should be noted that accumulated remittances, in millions of dollars, were higher than the same period of the previous year in the five countries.

22. The relaxation of mobility restrictions and the economic upturn in recent months have contributed to an increase in public revenues in some countries. The central governments of Guatemala (6.1%) and Costa Rica (10.3%) registered growth in their total accumulated revenues for the second consecutive month in February 2021, with respect to the same period of the previous year, as did Nicaragua (1.9%) as of December 2020. El Salvador registered its first increase in revenues in January (2.1%); and Panama (-21.4%) in December 2020 and the Dominican Republic (-2.0%) in January 2021, fell at a lower rate. Finally Honduras registered -17.7% as of December 2020, a drop slightly greater than the previous month. On the other hand, a lower growth in expenses was evidenced compared to the previous period in El Salvador 11.3% in February (15.3% in January) and in 13

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Central American Bank for Economic Integration Chief Economist Office

Nicaragua 8.0% in February (12.3% in January), and they fell in the Dominican Republic -7.3% in January. The rest of the countries grew at higher rates than the previous period. The contracting of new debt has increased by double digits in all the countries of the region, between 10.6% and 23.9% since December 2019.

23. Net international reserves showed mixed performance in Central America. The Dominican Republic registered inter-annual growth in international reserves of 30.6% as of March 2021; as did Guatemala (21.9%); Honduras (35.6%) and Nicaragua (34.8%). For its part, Panama doubled its reserves as of February 2021. While El Salvador and Costa Rica registered falls in reserves as of March 2021. Regarding the months of importation, Honduras and Guatemala have the capacity to cover between ten and eleven months of imports, with El Salvador being the country with the least coverage and less than three months of imports.

24. El Salvador initiated discussions with the IMF to underpin post-pandemic economic growth on April 6, 202133.This activity is carried out within the framework of the Article IV mission and in response to the Government's request for an Extended Fund Facility (EFF) financing, with the purpose of strengthening public finances and ensuring the financing of large projects in the country.

Graph 10. Interannual variation of the MAEI in Central American countries (cycle trend, percentages).

15.0 10.0

3.5 0.0 5.0 0.1 0.8

-10.0 -5.0 -2.5 -4.7 -6.0

-20.0 -15.0 -11.9

-30.0 -25.0 GTM SLV HND NIC CRI PAN DOM GTM SLV HND NIC CRI PAN DOM -40.0

-35.0

J.19

J.20

J.20

S.19

F.20

S.20

F.21

E.20

E.21

A.19

A.20

A.20

D.19

D.20

N.19

N.20

O.19

O.20 M.20 M.20 N.20 D.20 E.21 F.21 Source: Office of the Chief Economist with SECMCA information, as of April 22, 2021.

33 Government of El Salvador Press Release El Salvador initiates discussions with the IMF to underpin post-pandemic economic growth. 14

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Central American Bank for Economic Integration Chief Economist Office

Graph 11. Central banks' TPMs (percentages). Graph 12. Interannual inflation (percentages)

10 8 GTM HND NIC CRI DOM GTM SLV HND NIC CRI PAN DOM 8.30 8

6 6 5.84 4.11 4 3.94 4 3.50 2 1.77 3.00 0.47 2 0 1.75 -0.59 -2 0.75

0 -4

J.19

J.19

J.20

J.20

F.19

S.19

F.20

S.20

F.21

E.19

E.20

E.21

A.19

A.19

A.20

A.20

A.21

D.19

D.20

N.19

N.20

O.19

O.20

J.19

J.19

J.20

J.20

F.19

S.19

F.20

S.20

F.21

M.19

M.19

M.20

M.20

M.21

E.19

E.20

E.21

A.19

A.19

A.20

A.20

D.19

D.20

N.19

N.20

O.19

O.20

M.19

M.19

M.20 M.20 M.21 Source: Office of the Chief Economist with SECMCA information, as of April 22, 2021.

Graph 13. Accrued Exports Graph 14. Monthly exports (interannual variation, percentages). (interannual variation, percentages). 30 40 GTM SLV HND NIC GTM SLV HND NIC CRI PAN DOM CRI PAN DOM 20

10.8 10 7.9 3.1 20 0 1.1

-4.8 -6.4 7.9 -8.0 6.2 -10 4.8

-12.9 0.8 0

-20

3.1 -

-30 6.4 -

-40 12.9 -20 -

N.20 D.20 E.21 F.21

J.20

J.20

F.20

S.20

F.21

E.20

E.21

A.20

A.20

D.20

N.20

O.20 M.20 M.20 Source: Office of the Chief Economist with SECMCA information, as of April 22, 2021.

Graph 15. Accrued Imports Graph 16. Monthly imports (Interannual variation, percentages) (Interannual variation, percentages). 20 40 GTM SLV HND NIC CRI PAN DOM GTM SLV HND NIC CRI PAN DOM 10 9.8 4.5 0 -4.3 -1.9 20

-5.2

10.6 9.8

-10 9.3 7.5 -15.9 -16.5 -20

0 1.9

-30 -

5.2 -

-40

-20

16.5

-

J.20 J.20

F.20 S.20 F.21

E.21 E.20

A.20 A.20

D.20 N.20

O.20 N.20 D.20 E.21 F.21 M.20 M.20 Source: Office of the Chief Economist with SECMCA information, as of April 22, 2021.

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Central American Bank for Economic Integration Chief Economist Office

Graph 17. Accrued balance of trade (millions of dollars).

0 0 0 0

-500 -500 -500 -500

-1,000 -1,000 -1,000 -1,000

-1,500 -1,500 -1,500 -1,500

-2,000 -2,000 -2,000 -2,000 E.20 E.21 F.20 F.21 E.20 E.21 D.19 D.20 GTM -726.5 -613.1 SLV -840.7 -1,011.8 HND -455.7 -464.3 NIC -947.4 -934.4

0 0 0

-2,000 -500 -500 -4,000

-1,000 -1,000 -6,000

-8,000 -1,500 -1,500 -10,000

-2,000 -2,000 -12,000 F.20 F.21 E.20 E.21 D.19 D.20 CRI -764.5 -675.8 PAN -680.8 -481.2 DOM -9,075.1 -6,749.2

Source: Office of the Chief Economist with SECMCA information, as of April 22, 2021.

Graph 18. Accrued remittances Graph 19. Monthly remittances (Interannual variation, percentages). (Interannual variation, percentages).

45 40 GTM SLV HND NIC DOM GTM SLV HND NIC DOM

35

31.3 30 27.6 25

17.0 15 12.6 20

11.0 16.7 9.4

5 12.7 10.1 10

-5 6.8

-15

0

J.20

J.20

F.20

S.20

F.21

E.20

E.21

A.20

A.20

D.20

N.20

O.20 M.20 M.20 N.20 D.20 E.21 F.21 Source: Office of the Chief Economist with SECMCA information, as of April 22, 2021.

Graph 20. Central government: cumulative total revenues Graph 21. Central government: cumulative total (Interannual variation, percentages). expenditures (percentages). 30 30 GTM SLV HND NIC CRI PAN DOM GTM SLV HND NIC CRI PAN DOM

20 20 14.7 10.3 11.3 8.0 10 6.1 10 6.1 3.3 4.9 2.1 1.9 0 0 -2.0 -10 -10 -7.3

-20 -20 -17.7

-21.4 -30 -30 F.21 F.21 D.20 D.20 F.21 D.20 E.21 F.21 F.21 D.20 D.20 F.21 D.20 E.21

Source: Office of the Chief Economist with SECMCA information, as of April 22, 2021. 16

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Central American Bank for Economic Integration Chief Economist Office

Graph 22. Central government: total debt Graph 23. Central government: total debt structure (Interannual variation, percentages). (percentages).

GTM SLV HND NIC CRI PAN DOM GTM SLV HND NIC 12% 23.9 43% 34% 43 % 20.1 57% 19.0 19.8 57% 66% 88 18.0 % 15.6 CRI PAN DOM CA 10.6 17 23% % 30% 43% 57% 77% 83 70% %

F.21 F.21 E.21 D.20 F.21 F.21 S.20 Deuda externa Note: The debt structure in Figure 23 refers to the latest available month detailed in Figure 22. Source: Office of the Chief Economist with SECMCA information, as of April 22, 2021.

Graph 24. Net international reserves (NIR) Graph 25. NIR Coverage on imports (millions of dollars). (number of months of imports).

24,000 GTM SLV HND NIC GTM SLV HND NIC CRI PAN DOM CRI PAN DOM 10.7 20,000 9.9 18,700

16,000 8.2 7.6

12,000 12,174 5.9 5.1

8,000 8,253 7,169 2.5 4,000 3,228 2,447

0

J.20

J.20

F.20

S.20

F.21

E.20

E.21

A.20

A.20

D.20

N.20

O.20

M.20 M.20 M.21 E.21 F.21 E.21 D.20 F.21 E.21 D.20 Source: Office of the Chief Economist with SECMCA information, as of April 22, 2021.

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Central American Bank for Economic Integration Chief Economist Office ANNEX 1. LONG TERM FOREIGN CURRENCY SOVEREIGN DEBT RATING

Moody's Rating Agency Qualification prior to March 2020 Last pre-qualification Qualification as of April 22, 2021 Countries Rating Perspective Rating Perspective Rating Perspective Belize Caa2 Stable Caa1 Negative Caa3 Stable Guatemala Ba1 Stable Ba1 Stable Ba1 Negative El Salvador B3 Stable B3 Undereview B3 Negative Honduras B1 Stable ------Nicaragua B3 Stable ------Costa Rica B2 Stable B2 Stable B2 Negative Panama Baa1 Stable Baa1 Negative Baa2 Stable Dominican Republic Ba3 Stable ------Republic of China (Taiwan) Aa3 Stable ------Aa3 Positive

Standard & Poor's Rating Agency

Qualification prior to March 2020 Last pre-qualification Qualification as of April 22, 2021 Countries Rating Perspective Rating Perspective Rating Perspective Belice B- Stable CCC+ Stable CC Negative Guatemala BB- Stable BB- Negative Remark BB- Stable El Salvador B- Stable ------B- Stable Honduras BB- Stable ------Nicaragua B- Stable ------Costa Rica B+ Negative B+ Negative B Negative Panama BBB+ Stable BBB+ Negative BBB Stable Dominican Republic BB- Stable BB- Stable BB- Negative Republic of China (Taiwan) AA- Stable ------AA Positive

Fitch Ratings Agency

Qualification prior to March 2020 Last pre-qualification Qualification as of April 22, 2021 Countries Rating Perspective Rating Perspective Rating Perspective Belice n.a. n.a. n.a. n.a. n.a. n.a. Guatemala BB Negative BB- Negative remark BB- Stable El Salvador B- Stable B- Stable B- Negative Honduras n.a. n.a. n.a. n.a. n.a. n.a. Nicaragua B- Stable B- Stable B- Negative Costa Rica B+ Negative B+ Negative B Negative Panama BBB Negative BBB Negative BBB- Negative Dominican Republic BB- Stable BB- Negative BB- Negative Republic of China (Taiwan) AA- Stable ------Source: Trading Economics.

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Central American Bank for Economic Integration Chief Economist Office REFERENCES

Banco Central de la República de Argentina. (5 de Abril de 2021). Principales Variables. Obtenido de http://www.bcra.gov.ar/ Banco de la República Colombia. (7 de Abril de 2021). Tasa de Política Monetaria. Obtenido de https://www.banrep.gov.co/es

Banco de México (Banxico). (7 de Abril de 2021). Sistema de Información Económica. Obtenido de https://www.banxico.org.mx/SieInternet/consultarDirectorioInternetAction.do?sector=18&accion=co nsultarCuadro&idCuadro=CF101&locale=es

Bank of Korea. (5 de April de 2021). Monetary Policy. Obtenido de https://www.bok.or.kr/eng/main/contents.do?menuNo=400015

BBC News. (29 de Marzo de 2021). Canal de Suez: desencallan por completo al carguero Ever Given después de casi una semana bloqueando el tráfico. Obtenido de https://www.bbc.com/mundo/noticias- internacional-56561334

Caja Costarricense de Seguro Social. (8 de Abril de 2021). Seguro de pensiones, trabajadores asegurados y masa cotizante por mes, según sector institucional y y rama de actividad. Obtenido de https://www.ccss.sa.cr/est_epts

COVID-19 Vaccine Tracker. (5 de April de 2021). Obtenido de https://covid19.trackvaccines.org/vaccines/

Daily Fx. (5 de April de 2021). El S&P 500 bate récord en el arranque de la semana tras el NFP, pero afronta serios riesgos a corto plazo. Obtenido de https://www.dailyfx.com/espanol/analisis_del_mercado/analisis_diario/2021/04/05/El-SP-500-inicia- la-semana-en-zona-de-records-tras-el-NFP-pero-afronta-serios-riesgos-a-corto-plazo.html

Departamento Administrativo Nacional de Estadística (DANE). (8 de Abril de 2021). Inflación, Indice de Producción Industrial y Desempleo. Obtenido de https://www.dane.gov.co/

European Medicines Agency. (7 de April de 2021). AstraZeneca’s COVID-19 vaccine: EMA finds possible link to very rare cases of unusual blood clots with low blood platelets. Obtenido de AstraZeneca’s COVID-19 vaccine: EMA finds possible link to very rare cases of unusual blood clots with low blood platelets

Federal Reserve Bank of St. Louis. (7 de Abril de 2021). Continued Claims (Insured Unemployment). Obtenido de https://fred.stlouisfed.org/series/CCSA

Federal Reserve Bank of St. Louis. (7 de April de 2021). S&P 500 (SP500) and NASDAQ 100 Index. Obtenido de https://fred.stlouisfed.org/series/NASDAQ100. https://fred.stlouisfed.org/series/SP500

Gobierno de El Salvador. Comunicado de prensa. (6 de Abril de 2021). El Salvador inicia conversaciones con el FMI para garantizar el crecimiento económico post pandemia. Obtenido de https://www.bcr.gob.sv/esp/index.php?option=com_k2&view=item&id=1554:el-salvador-inicia- conversaciones-con-el-fmi-para-garantizar-el-crecimiento-econ%C3%B3mico-post- pandemia&Itemid=168

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Central American Bank for Economic Integration Chief Economist Office

Instituto Nacional de Estadística y Censos República Argentina. (8 de Abril de 2021). Indice de Producción Industrial Manufacturero y Tasa de Desocupación. Obtenido de https://www.indec.gob.ar/

Instituto Nacional de Estadística, Geografía e Informática (INEGI). (8 de Abril de 2021). Indice Nacional de Precios al Consumidor, Desocupación e Indicador Mensual de la Actividad Industrial. Obtenido de https://www.inegi.org.mx/

Instituto Nacional de Estadísticas y Censos de Costa Rica. (8 de Abril de 2021). Encuesta Continua de Empleo, trimestre móvil noviembre-diciembre 2020 y enero 2021. Obtenido de https://www.inec.cr/encuestas/encuesta-continua-de-empleo

Instituto Salvadoreño de Seguridad Social. (8 de Abril de 2021). Obtenido de Patronos y trabajadores reportados y cotizados al ISSS (número y salarios medios mensuales) a enero 2021: https://www.transparencia.gob.sv/institutions/isss/documents/estadisticas.

Internal Revenue Services (IRS). (1 de April de 2021). IRS, Treasury disburse more Economic Impact Payments under the American Rescue Plan; total tops 130 million with more to come. Obtenido de https://www.irs.gov/newsroom/irs-treasury-disburse-more-economic-impact-payments-under-the- american-rescue-plan-total-tops-130-million-with-more-to-come

International Monetary Fund. (April de 2021). World Economic Outlook: Global economy on firmer ground, but with divergent recoveries amid high uncertainty. Obtenido de https://www.imf.org/en/Publications/WEO/Issues/2021/03/23/world-economic-outlook-april-2021

Johns Hopkins University, Coronavirus Resource Center. (5 de April de 2021). New COVID-19 Cases Worldwide. Obtenido de https://coronavirus.jhu.edu/data/new-cases

Lewis, D. J. (7 de April de 2021). Weekly Economic Index. New York, United States. Obtenido de https://www.newyorkfed.org/research/policy/weekly-economic-index.

Ministerio de Economía de Guatemala. (8 de Abril de 2021). Informe Económico Semanal. Obtenido de Informe Económico Semanal: https://www.mineco.gob.gt/dae-an%C3%A1lisis- macroecon%C3%B3mico

National Statistics, Republic of China (Taiwan). (7 de April de 2021). Latest Indicators. Obtenido de https://eng.stat.gov.tw/point.asp?index=8

Organización Mundial de la Salud. (25 de Marzo de 2021). COVAX informa a los participantes de los retrasos en la entrega de vacunas del Serum institute de la India (SII) y AstraZeneca. Obtenido de https://www.who.int/es/news/item/25-03-2021-covax-updates-participants-on-delivery-delays-for- vaccines-from-serum-institute-of-india-(sii)-and-astrazeneca

Organization of the Petroleum Exporting Countries. (1 de April de 2021). 15th OPEC and non-OPEC Ministerial Meeting concludes. Obtenido de https://www.opec.org/opec_web/en/press_room/6400.htm

Our World in Data. (5 de April de 2021). Coronavirus COVID-19 cases. Obtenido de https://ourworldindata.org/coronavirus

Precio del oro.com. (March de 2021). Noticias Reuters. Obtenido de https://www.preciooro.com/precio-del- oro-en-marzo-2020.html 20

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Secretaría Ejecutiva del Consejo Monetario Centroamericano. (8 de Abril de 2021). SIMAFIR. Obtenido de http://www.secmca.org/simafir.html

SIPEN. (8 de Abril de 2021). Superintendencia de Pensiones. Obtenido de https://www.sipen.gob.do/index.php/estadisticas/estadistica-previsional

Statistics Korea. (7 de April de 2021). Latest Indicators. Obtenido de http://kostat.go.kr/portal/eng/index.action

The World Bank. (February de 2021). COMMODITIES MARKETS. Obtenido de https://www.worldbank.org/en/research/commodity-markets

Trading Economics. (6 de January de 2021). Obtenido de https://tradingeconomics.com/dominican- republic/rating

U.S. Bureau of Economic Analysis. (25 de March de 2021). New release: Gross Domestic Product, Fourth Quarter and Year 2020 (Third Estimate). Obtenido de https://www.bea.gov/news/2021/gross- domestic-product-fourth-quarter-and-year-2020-second-estimate

U.S. Bureau of Economic Analysis. (26 de March de 2021). Personal Income and Outlays, February 2021. Obtenido de https://www.bea.gov/news/2021/personal-income-and-outlays-february-2021

U.S. Bureau of Labor Statistics. (2 de April de 2021). Economic news release: Employment situation summary. Obtenido de https://www.bls.gov/news.release/empsit.nr0.htm.

U.S. Bureau of Labor Statistics. (2 de April de 2021). Labor Force Statistics from the Current Population Survey. Obtenido de https://data.bls.gov/timeseries/lns14000000. https://data.bls.gov/timeseries/LNS14000009.

United States Department of Labor. (1 de April de 2021). Unemployment Insurance Data. Obtenido de https://www.dol.gov/newsroom/releases/eta

World Bank. (April de 2021). Renewing with Growth. LAC Semiannual Report. Obtenido de https://openknowledge.worldbank.org/handle/10986/35329

Worldometer COVID-19 Coronavirus Pandemic. (5 de April de 2021). Obtenido de https://www.worldometers.info/coronavirus/#countries

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