WASHINGTON, USA – A new Inter-American Development Bank (IDB) study points to agribusiness, construction and tourism as the industries with the greatest potential to generate jobs and growth in Central America, Mexico, Panama and the Dominican Republic.
The study found that higher production in these industries could galvanize the regional economy in 2023 for two reasons: the large volume of inputs they require from all other industries, and their economic clout, since they account for 22 percent of the region’s output.
The IDB’s new annual economic report on the region – Opportunities to Boost Production, Jobs, and Value Chains – analyzes these countries’ production structures to determine how to revitalize their economies, create jobs, and diversify exports. The study also highlights industries like agriculture, forestry and fishing, tourism, commerce, and education, which play an outsized role in generating jobs and incomes.
Financial services, professional services and commerce also stimulate production networks because they make more extensive use of other industries. The report therefore recommends promoting efficient financial systems, coupled with professional business services that are high quality and involve technical and scientific (STEM) skills.
The IDB study also proposes opportunities to diversify exports and products to smooth out the volatility of international demand. It recommends diversifying exports of agricultural goods, as well as of products like more complex textiles, machinery, electronic equipment, and pharmaceuticals that would help countries better integrate into local and global export chains. Additionally, the report urges countries to invest in education, which has been proven to help expand local business participation in global export chains.
Regional macroeconomic context
The IDB report also analyzes the region’s macroeconomic context in 2022. Over the year, its GDP grew by an average of 5.7 percent, and the economy showed resilience as tourism and remittances sprang back and the volatility of agricultural exports stabilized.
By October 2022, formal jobs had rebounded to levels 5 percent higher than before the pandemic. Inflation is forecasted to slow in 2023 but remain at the upper end of the ideal range.
However, the report predicts slower growth and higher interest rates and prices, especially food prices, in 2023, which will be especially detrimental to poverty and food security. The countries in the region need to design a coordinated response to these difficulties, promote economic recovery, and regain development momentum.
