Economic Resilience During COVID-19’s First Year: Case Studies of Costa Rica, Dominican Republic and Panama

Abstract

During the last two decades, the services sector has become increasingly important for the world’s economy. Technological advances have played a key role in lowering communication costs and have also enabled the development of new ways to deliver services. Some countries have been able to take advantage of this new wave, transforming their economies and becoming more resilient towards external shocks. For example, instead of depending mainly on tourism, some countries have diversified their services exports, offering services with greater added value, knowledge-intensive and focused more on information and communications technologies (ICT). These changes have also provided more opportunities for higher income, productivity, employment, investment, and trade. Services are also crucial for achieving the 2030 Sustainable Development Goals. But last year, the world economy probably shrank by 4.3 percent, a setback matched only by the Depression and the two world wars, according to the World Bank. For most countries, the COVID-19 pandemic is one of their biggest challenges. However, some services exports have continued and, in some cases, grew compared to 2019. Preliminary results regarding foreign trade have shown that the services sector has responded effectively to the COVID-19 pandemic. The paper focuses on three countries: Costa Rica, the Dominican Republic, and Panama, which are close competitors and heavily rely on their tourism sector. In the first three quarters of 2020: Costa Rica increased its’ exports of knowledge-intensive services, while Panama increased its’ exports of transport services and the Dominican Republic, on the other hand, according to preliminary data, is still heavily relying on exports of travel services.