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Aruba, 18 May, 2012 - Forecast economic growth in Central America for 2012 remains impressive! Central America, specifically Panama and Costa Rica have been two of the few investment hotspots over the last few years as many other countries around the world suffered from the European and North American led economic turmoil.

Central America will show a slowdown during 2012 from 4.7% to 4.2% but compares favorably with the rest of the world. Economic recovery from the international crisis in Central America took only two years. The Central American domestic consumer market is set to grow in prominence over the next five years. A low economic base means that GDP per capita is expected to increase at a significant rate, with highly positive implications for private consumption. Several international organizations (WB, IDB, IMF) have a positive outlook over the longer term as well, with regional GDP per capita (in US dollar terms) expected to increase by more than 100% over the next 10 years and regional real GDP growth set to average 3.2%.

Between 2012 and 2017, per capita consumption in US dollar terms is forecast to grow by 30% in Guatemala; 30% in El Salvador; 45% in Costa Rica; and 30% in Honduras. This growth is expected to be driven by consumers trading up to higher-value, branded and premium products, and by lower income consumers simply buying more. The region is highly reliant on export revenues, especially from agro-products, and therefore any economic slowdown prompted by Europe or China could impact government revenues. At the same time, the region is exposed to fluctuations in commodity prices, raising inflation concerns. The region is highly exposed to energy and industrial metals prices, which could raise the cost of construction materials and stoke inflation concerns.

Central America is gradually reducing its reliance on its US trade ties, exemplified by the signing of a liberal trade agreement with the EU in late May 2010 which hopefully will go into effect later this year. Countries are also looking to new markets such as Brazil, India, China and Korea. However, the US remains the region's major trade partner, absorbing 41% of its total exports.

Read more/ Source: Central America Newsflash - April 2012 -