Speech

Raising Productivity Growth in Central America, Panama and the Dominican Republic

July 29, 2024

It is my great pleasure to welcome you to the 18th Regional Conference on Central America, Panama, and the Dominican Republic, co-hosted this year with the Central Bank of Costa Rica.

I would like to thank the First Vice President of Costa Rica, Stephan Brunner, and the Governor of the Central Bank, Róger Madrigal López.

This conference serves as an opportunity to hold a frank and open dialogue on regional and global developments, common challenges, and policy priorities.

Since we last met, despite successive shocks, the global economy has shown surprising resilience. Our latest update to the World Economic Outlook suggests global growth remains steady at 3.2 percent, and inflation is expected to continue falling, though at a slower pace.

In the medium-term, however, growth prospects have weakened. Growth in Latin America is projected to average just 2 percent over the next 5 years. This is much lower than those of peer economies across Europe and Asia.

Central America, Panama, and the Dominican Republic are the exception. This year, they outperformed the rest of Latin America and other emerging markets with stronger growth and lower inflation. In the medium-term, we project growth in these countries to be about double that of the Latin American and Caribbean region—more in line with other emerging market economies.

Much credit for these remarkable outcomes goes to you, the policymakers. Your policies have stabilized public debt and brought inflation under control, while strengthening social support systems.

But there is still work to be done. Poverty and inequality persist, with ample room to raise living standards. And in a more shock-prone, low-growth world, building economic resilience and igniting productivity is essential.

How can policymakers address these challenges? Let me outline four recommendations.

First, rebuild fiscal buffers. High public debts leave less room in the budget to prioritize spending on climate change, technology, and people—investments that could potentially boost productivity.

Second, continue to strengthen monetary policy frameworks to keep inflation within central bank targets. In an uncertain world, keeping inflation low and stable is important for stability and helps increase economic activity.

Third, improve governance and the business climate, which is critical for competition and will help promote both private and foreign investment. This will involve tackling crime—an important factor behind migrant outflows in some parts of the region.

Finally, boost labor force participation. Since 2000, the labor force in Latin America has been growing 0.5 percent per year. Now, the share of the working-age population in the region is peaking. This poses an additional challenge. Policies can help by encouraging more women to enter the workforce through training or by expanding childcare programs and parental leave benefits.

We will discuss these recommendations in more detail during the conference. I hope that the insights and research presented will offer new perspectives and provide a useful roadmap for action.

But as always, you are not alone. The IMF is here to support our members.

I would like to congratulate the Costa Rican authorities for having recently concluded their ambitious and home-grown economic reform program.

Costa Rica was the first country to receive and complete the IMF’s Resilience and Sustainability Facility arrangement—a testament to its role as a global leader in the fight against climate change. I encourage you all to attend the session on the IMF’s book on climate change challenges and opportunities in Latin America to learn more about policy options for climate mitigation and adaptation.

We will also continue to support our members in the region through our policy advice and extensive capacity development, which is largely provided by the IMF’s Regional Technical Assistance Center for Central America, Panama, and the Dominican Republic. Working together we can build a brighter future for the region and the world.

Thank you in advance for what I know will be a productive conference.