Publication: Unleashing Central America's Growth Potential
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2021-01
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2021-04-26
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Central America’s priority is to recover from its deepest economic contraction and restore strong, sustainable economic growth. With increases in working age population projected to decline sharply, strong growth in the long run can only be achieved with higher productivity. More effective participation in global value chains (GVCs), as well as a robust shift towards sophisticated exports of goods and services will be needed, but neither can be ensured without firms investing in productivity-enhancing innovations. With a high likelihood of limited structural change, greater aggregate productivity must come from within each sector of manufacturing, services and agriculture. The synthesis report analyzes the main findings of the Unleashing Central America’s Growth Potential Study, focusing on productivity and export performance of the region over the past three decades and accounting for the impact of the Coronavirus (Covid-19) pandemic on the region. It aims to identify broad strategic directions for the region that would help to increase sophistication of exports, reduce productivity gaps within the region and vis-à-vis other regions, and achieve higher productivity growth. Where relevant, the report suggests areas for further work that could help develop more granular policy recommendations. The rest of this synthesis report is organized as follows: the first section provides an overview of the growth performance of the region over the last thirty years, and provides the current and future challenges facing the region; the second section reviews the performance of productivity growth during 1991-2017; and the third section reviews the growth of exports of goods and services during 1991-2017.
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“Ulku, Hulya; Zaourak, Gabriel. 2021. Unleashing Central America's Growth Potential. © World Bank. http://hdl.handle.net/10986/35503 License: CC BY 3.0 IGO.”
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The objective of this study is to investigate the drivers and constraints of growth and productivity in Panama and explore areas with high growth potential. The value added of the study is to provide an in-depth analysis of the drivers and constraints of Panama’s growth using a wide range of analytical tools. The analysis employs several quantitative methods to provide an objective assessment of the drivers and constraints of growth in Panama, including the long-term growth model (LTGM), computable general equilibrium model (CGE), growth diagnostics and product space analyses. The novelty of this study is to employ the same framework, analytical tools, and data to conduct a parallel analysis for each Central American country to allow for a meaningful cross-country comparison. 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Drawing on the historical growth experience of Guatemala and employing a range of analytical tools, this country analysis aims to provide an in-depth study of the drivers and constraints of the country’s economic growth. The report first takes stock of the historical growth and macro performance of the country, before moving to a growth accounting exercise to understand the past drivers of the country’s growth. In the same vein, the subsequent section analyzes aggregate trends in productivity, the engine of long-term growth, and its relation to the process of structural transformation. The study then uses a cross-country benchmarking and panel data regression analysis based on the growth diagnostic developed by Hausmann et al. (2005) to identify the binding constraints to growth. Finally, the analysis presents the links between growth, diversification, and exports. This analysis relies on a wide range of analytical tools, which are applied to each of the six countries in the study to enable cross-country comparisons. Several quantitative methods are employed to provide an objective assessment of the drivers and constraints of growth in Guatemala, including the long-term growth model (LTGM), the computable general equilibrium model (CGE), growth diagnostics, and product space analyses. This same framework, analytical tools, and data are used for each Central American country to conduct a parallel analysis that enables meaningful cross-country comparisons. Therefore, given the wide breadth of the study, in terms of the methodologies used, subjects analyzed, and countries covered, it does not aim to analyze in depth each driver and constraint of growth and provide granular policy recommendations. 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