Caribbean & Central America - January 2011 (ISSN 1741-4458)

Fuel prices have already been increased three times to date in January, suggesting a tough year in 2011. Inflation was already comparatively high at 6.5% in 2010, given that the economy probably didn't manage 2% real GDP growth last year. A two month officially imposed price freeze on basic foods expires on 19 January, but it might be rolled over, in the current inflationary environment. The Lobo government, employers and unions are just beginning minimum wage talks for 2011. After failed talks in 2010, President Lobo unilaterally awarded a 6% general increase to US$311/mth (urban areas).
In February the IMF will send a mission to evaluate the country's economic performance under the two18-month US$202m stand-by facilities signed in October 2010. The central bank president Marí­a Elena Mondragón says the government expects Fund approval, as it had met most of the IMF targets set for 2010, notably for reserves, which rose US$603m to end the year at US$2.74bn. Mondragón says that the central bank's priority this year is to control excess monetary liquidity and reduce interest rates by extending internal debt maturities. Less impressive is the fiscal deficit, which is still at 4.5% of GDP, despite relative government success in meeting its tax collection targets. The problem on the fiscal side is largely related to bloated public sector wage commitments. The World Bank is (optimistically) forecasting real annual GDP growth of 3% in 2011 and 3.3% in 2012.

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