Recently published research from Business Monitor International, "Central America Business Forecast Report Q3 2013", is now available at Fast Market Research

Boston, MA -- (SBWire) -- 08/05/2013 --Central America as a region will remain heavily dependent on the performance of developed-state economies, particularly the US, which remains a major source for remittance flows and demand for exports.

Drug-related violence and high levels of insecurity will remain a major concern for most of the region, although such concerns will be particularly elevated among the 'northern triangle' states of Guatemala, El Salvador and Honduras.

The region's economic trajectory remains highly divergent. Even though we expect its growth story to moderate in the coming years, Panama is still set to experience one of the fastest real GDP growth rates in the region, whereas El Salvador and Guatemala will struggle.

Major Forecast Changes

While we continue to expect growth to slow in Costa Rica, after the country expanded by a robust 5.1% in 2012, we see potential for greater than initially anticipated investment. As such, we have modestly revised up our 2013 real GDP growth forecast to 4.2% (from 3.7% previously) and our 2014 forecast to 3.8% (from 3.4%).

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We have revised down Honduras 2013 growth forecast, from 3.8% to 3.5%. Indeed, a virulent strain of coffee rust is likely to see net exports weigh far more heavily on headline growth than initially expected.

After Honduras posted an estimated budget deficit of 5.9% of GDP in 2012, we revised our forecast from calling for a fiscal deficit of 3.1% to 5.0% in 2013. We have long believed that increased political pressure in the run-up to the country's November election will make substantial fiscal consolidation difficult. However, given evidence of limited austerity in H212, we believe the shortfall is likely to be even more substantial than we initially anticipated.

Key Risks To Outlook

Upside Risk: The performance of the US economy, and particularly US demand for regional exports, remains the biggest upside risk to our growth forecasts. We currently forecast US real GDP growth of 2.1% in 2013 and 2.7% in 2014, but if growth is significantly stronger, we would be likely to see Central American economies perform better than we currently anticipate.

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