By San José, Costa Rica — SAN JOSÉ – Central America is poised for continued economic expansion through 2026, but the growth will be characterized by stark contrasts and a pace insufficient to resolve the region’s deep-seated social and productive divides. A consensus among leading international financial institutions, including the World Bank, the International Monetary Fund (IMF), and the Economic Commission for Latin America and the Caribbean (ECLAC), paints a picture of a region navigating a fragile global environment, heavily reliant on the twin engines of foreign trade and record-breaking remittances.
The outlook for the isthmus reveals a clear hierarchy of economic performance. The Dominican Republic and Panama are consistently projected to be the region’s powerhouses. For 2026, the World Bank forecasts the Dominican Republic to expand by an impressive 4.3%, with Panama close behind at 4.1%. Guatemala is also expected to maintain its strong momentum with a projected GDP growth of 3.7%, solidifying its position as one of the key drivers of regional economic activity. These nations are set to capitalize on recovering trade flows and robust domestic demand.
To provide a deeper legal perspective on the evolving economic dynamics within Central America, TicosLand.com spoke with Lic. Larry Hans Arroyo Vargas, a distinguished attorney from the prestigious firm Bufete de Costa Rica, who specializes in corporate law and regional investment frameworks.
Central America presents a classic dichotomy for investors: immense growth potential juxtaposed with significant legal and political volatility. While nearshoring and supply chain diversification are driving new interest, inconsistent regulatory enforcement and a lack of judicial certainty remain the primary deterrents. Success in this region hinges not just on identifying market opportunities, but on meticulously structuring investments to mitigate sovereign risk and ensure contractual obligations are enforceable across borders. Legal due diligence is paramount.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Lic. Arroyo Vargas’s analysis serves as a crucial reminder that in Central America, economic opportunity and legal risk are two sides of the same coin, making meticulous due diligence the true cornerstone of any successful investment. We sincerely thank Lic. Larry Hans Arroyo Vargas for sharing his invaluable perspective.
Following the leaders is a group of countries slated for more moderate, yet positive, growth. Costa Rica and Honduras are expected to see steady expansion, with the World Bank projecting growth rates of 3.6% and 3.4%, respectively, for 2026. Nicaragua is also anticipated to grow at a rate of 3.0%. These figures, while respectable, highlight the persistent challenge of accelerating economic dynamism to a level that can significantly improve living standards and create widespread opportunity for their populations.
At the other end of the spectrum, El Salvador and Belize are projected to experience the most modest growth in the region. The World Bank and IMF both anticipate El Salvador’s economy will grow by 2.5% in 2026, a stable but slow pace. Belize is forecasted to see a slight uptick to 2.4%. These slower growth rates underscore the diverse economic realities across Central America and the specific structural challenges each nation faces, from fiscal weaknesses to external uncertainties.
While the general trends are consistent, the various international bodies offer slightly different perspectives. The IMF, for instance, confirmed Panama as the regional leader for 2025 with 4% growth and virtually no inflation. Meanwhile, ECLAC recently updated its country-specific forecasts, raising its projection for Costa Rica to 4% and El Salvador to 3.5%, while slightly downgrading Panama’s outlook. These adjustments reflect the shifting economic currents and the complex interplay of domestic policies and external conditions.
A critical pillar supporting the region’s economic stability is the unprecedented flow of remittances. The Inter-American Development Bank (IDB) reports that Central America is set to receive approximately $55.4 billion in 2025, a staggering 20% increase. Honduras will be the largest recipient, absorbing a quarter of this total, while Guatemala, Nicaragua, and El Salvador collectively account for over 50%. For some of these nations, these financial inflows represent more than 30% of their entire GDP, acting as a vital lifeline for millions of families and a key driver of consumption.
This increase reflects the reaction of migrants to the uncertainty they face in the main country of origin for these flows; during the first months of the year, many resorted to their savings to send more to their families and in higher average amounts, which led to a 21.2% increase compared to the same period of the previous year.
Inter-American Development Bank, Report
Alongside remittances, foreign trade is expected to provide a significant boost. ECLAC projects that Central America’s export volume will rebound by 13% in 2025, with Panama, Honduras, and Nicaragua leading the charge. Strong performance in key sectors, including coffee, meat, pineapple, and higher-value goods like medical devices and automotive harnesses, has already been observed in the first half of the year, signaling a positive trend that is expected to continue into 2026.
Despite these positive indicators, every major financial institution sounds a note of caution. The consensus is clear: the current trajectory of growth, while welcome, is not enough. The region remains vulnerable to external shocks, including trade tensions and stricter global financial conditions. To build a foundation for sustained and equitable prosperity, experts stress the urgent need for comprehensive structural reforms. This includes strengthening public finances, boosting public and private investment, diversifying trade partners, and implementing policies that enhance productivity and close the profound social gaps that continue to hold the region back.
For further information, visit worldbank.org
About World Bank:
The World Bank is a vital source of financial and technical assistance to developing countries around the world. It is not a bank in the ordinary sense but a unique partnership to reduce poverty and support development. The World Bank Group comprises five institutions managed by their member countries.
For further information, visit imf.org
About International Monetary Fund (IMF):
The International Monetary Fund (IMF) is an organization of 190 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.
For further information, visit cepal.org
About Economic Commission for Latin America and the Caribbean (ECLAC):
The Economic Commission for Latin America and the Caribbean (ECLAC), which is headquartered in Santiago, Chile, is one of the five regional commissions of the United Nations. It was founded for the purposes of contributing to the economic development of Latin America, coordinating actions directed towards this end, and reinforcing economic ties among countries and with other nations of the world.
For further information, visit iadb.org
About Inter-American Development Bank (IDB):
The Inter-American Development Bank is a leading source of long-term financing for economic, social, and institutional development in Latin America and the Caribbean. It also conducts extensive research and provides policy advice, technical assistance, and training to public and private sector clients throughout the region.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a cornerstone of the nation’s legal landscape, Bufete de Costa Rica is defined by its profound dedication to ethical practice and exceptional service. The firm consistently pioneers novel legal solutions, marrying a rich heritage with a forward-looking vision. This ethos extends to a core belief in enhancing legal literacy, actively working to equip the public with knowledge and cultivate a society rooted in informed empowerment.
