Potential Output Growth Estimates for Central America and the Dominican Republic
IMF Working Papers, December 23, 2016
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Bibliographic details
- Authors: Roberto Garcia-Saltos, Fan Zhang, Iulia Ruxandra Teodoru
- Published: December 23, 2016
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475563153.001
Summary findings
- The paper presents estimates of potential output for all Central American economies.
- Potential output growth has declined in recent years in most economies of Central America.
- Lower capital accumulation and TFP growth are accounting for most of this decline.
- Apart from Costa Rica, there are no indications of significant economic slack in 2015 in Central America.
- Looking forward, potential growth in most Central American economies is expected to continue at an average of 4 percent in the medium-term due to structural constraints to capital and employment growth, and low TFP growth.
- Increasing potential growth should be a policy priority.
Drivers of the decline in potential output
- Lower capital accumulation.
- Lower total factor productivity (TFP) growth.
- Structural constraints to capital and employment growth.
- Low TFP growth limiting medium-term potential.
Economic slack and cyclical conditions
- No indications of significant economic slack in 2015 in Central America, with the sole exception of Costa Rica.
Medium-term projections and scenarios
- Potential growth in most Central American economies is expected to continue at an average of 4 percent in the medium-term.
Policy recommendations
- Structural reforms must be directed at:
- Improving business conditions.
- Improving product markets.
- Improving labor markets.
- Enhancing the capacity for innovation.
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- Potential Output Growth Estimates for Central America and the Dominican Republic