26 June 2026

Regional economies are on course to outperform Latin American rivals with substantial economic growth shown by recent central bank results.

The news will be a boost for Central American governments that have been proactive in dealing with inflation, diversified their trading partners and exports and taken advantage of the World Cup bounce.

Nicaragua’s economy grew by 6.1% in Q1 2026, Panama’s by 4.8% in the same period, Costa Rica and Guatemala’s economic activity grew 4.5-4.6% from January-April. The Honduran Central Bank reported 3.5% growth so far in 2026. This is in contrast to forecasts for Latin America which puts GDP growth at 2.1-2.3% for this year.

Long term issues such as structural challenges, weak institutions, political instability, high borrowing costs and access to finance remain which makes Central America’s growth all the more impressive. Costa Rica’s growth was driven by financial services, construction and IT services. However, exports from the country’s free trade zones have softened due to lower global demand. For an export industry built on medical technology making 48-52% of sales, this could become a larger issue.

Guatemala’s growth has been defined by strong domestic and regional trade which includes Central American exports outselling those to the US for the first time in the country’s history. Between the two, they brought in US$3.69bn. Manufacturing has increased and remittances remain strong with a 10.5% year-on-year growth to US$8.43bn in the first quarter.

Under new President Nasry Asfura, Honduras has attempted to tackle its major issues such as a lack of employment opportunities, violence and debt at the National Electric Energy Company (ENEE). Growth has been concentrated in financial services, telecommunications and agro-industry, especially coffee. 

The Banco Central de Nicaragua (BCN) announced growth of 6.1% in the first quarter of 2026.

“Economic activity maintained the growth rate of previous quarters, with quarterly GDP registering year-on-year growth of 6.1% (5.9% in the previous quarter),” said a BCN statement.

For 2026, the BCN estimates total growth of 3.5-4.5% and inflation between 2.5% and 3.5%. Mining led Nicaragua’s economic impetus with a 24% year-on-year growth with construction not far behind at 16.7%. Trade showed impressive results of a 15.8% rise, hotels and restaurants were up 9.8% and agriculture and livestock rounded out the top five with a 6.8% improvement.

However, not all sectors showed growth and fishing and aquaculture suffered with a 10% drop. Electricity (-3.9%) and public administration and defence (-3%) also showed negative growth.

Consumption grew by 3.6% whereas strong domestic demand was down to fixed investments at 10.9% growth. Net external demand was led by exports with 12.9% growth, outpacing imports which grew by 5.8%.

This would be the sixth year running for GDP growth in Nicaragua following a contraction from 2018-2020 which included the Covid-19 pandemic effects.

Panama’s economy grew by 4.8% in Q1 2026 with the Canal leading the way. Transportation, storage and mail all had strong performances but the economy was driven by a 5.4% increase in Canal revenues.

The National Institute of Statistics and Census (INEC) reported that the Canal and construction and trade were the main impetus for growth. GDP reached US$22.55bn in the first quarter, a US$1.03bn rise year-on-year.

Transport, storage and mail had the largest growth at 8.2% thanks to Canal revenues and services for the increased number of ships passing through. Average daily crossings have increased to 41, compared to 36-37 normally due to the Middle Eastern crisis. Traffic through the Canal represents 3-6% of total global trade.    

Construction had a growth of 6.5% due to an increase in residential building and public infrastructure works. Trade was just behind at 6.4% with fuels, construction material, textiles, food and beverages and other consumer goods leading this sector.

Protests in Bocas del Toro over pension reform for banana plantation workers saw an 80.6% drop in banana exports that accounted for the contraction in agriculture of -4.3%. Fish (-16.4%) and milk (-11.6%) also showed heavy losses.

Panama’s economy is expected to grow by 3.8-4.1% this year according to multilateral organisations.

Source: Central America Briefing | Vol 14, Issue 13