Guatemala has been showing stable growth rates since 2010 thanks to its prudent macro-economic performance. The estimated growth rate for 2018 is 2.8% and for 2019, the Central Bank of Guatemala’s projections place it at between 3.1 and 4.1%. However, just like other countries of the region, Guatemala continues to phase major challenges due to legal uncertainty, corruption and crime, which harm foreign investment and lead to high economic costs.
On the other hand, Guatemala continues to experience significant progress in areas such as road infrastructure, education, and poverty reduction, as well as in its updates to the Trade Code, which will promote more private and public investment, as well as more human capital development.
For November 2018, Moody’s and Fitch maintained Ba1 and BB ratings respectively, with stable perspectives. This reflects confidence in the country, and no perception of deterioration, which promotes foreign investment. Like any process of continuous improvement, the country relies on indicators such as global competitiveness index (ranked 84), infrastructure (6 out of 10 points), unemployment, and poverty to improve its national competitiveness and productivity and thus earn a higher rating that leads access to more foreign investment.
In recent years, interest rates have shown a moderate behavior, which is indicative of a cautious monetary policy. According to data from the IMF, in September 2018, the inflation rate was 4.55%, which is a monthly rate of 0.60%, and an accumulated 2.13% inflation rate. The inflation rate projected for 2019 is between 3.6 and 4.5.
CPI and variations
Source: Produced by authors with information from the National Statistics Institute 2018.
Family remittances made to Guatemala grew by 12.6% between January and October 2018 from 2017. It is important to underscore that foreign currency from family remittances is expected to contribute more than 11% to the GDP.
The oil price drop and likely economic deceleration in the United states resulting from its trade war with China could impact exports in 2018. However, traditional exports remained stable or grew when comparing January 2017 with January 2018 in commodities such as: bananas, sugar, coffee and cardamom, with rates of 53.1, 83.4, 45.7 and 48.2, respectively (in millions of US Dollars) according to Bank of Guatemala data.
For 2018, the preliminary CIF imports for September will close with a total amount of USD 14,577.2 million, and they are expected to exceed the 2017 total of USD 18,389.8 million. The trend in interannual accumulated variation rates for imports is estimated at between 6.5 and 9.5 by the end of 2018, and at 6.0 and 9.0 for 2019.
The flow of foreign direct investment in 2018 will be 1,175.3 million U.S. Dollars. This flow increased only slightly by comparison with 2017 because of the limited improvement in legal certainty and due to political instability, both of which factors have had a negative impact on potential investment decisions.
Guatemala’s indicators progress at a slow growth rate; investment through public spending particularly in social factors and infrastructure is expected to increase. With sufficient resources to support economic activities, and with significant time reductions in border crossings and Customs procedures, this slow growth pace could accelerate.