Guatemala flag Guatemala: Economic and Political Overview

The economic context of Guatemala

Economic Indicators

Guatemala has demonstrated resilience in the face of numerous crises. The economy has remained robust, benefiting from a steadfast adherence to prudent policies characterized by low fiscal deficits and debt-to-GDP ratios, along with ample international reserves. Additionally, substantial remittance inflows have further bolstered economic stability. Following a notable recovery in 2021, Guatemala's economic momentum has tapered off, with GDP growth halving to a steady 4.1% in 2022. Guatemala's robust growth trajectory persisted in 2023, with real GDP estimated to have expanded by 3.4%, thanks to credit expansion and higher remittances directed towards the private sector. The IMF anticipates that in 2024, GDP growth will revert to its potential rate of 3.5%, propelled by sustained consumption fueled by strong remittances and credit expansion.

In 2023, the central government's fiscal deficit decreased to 1.3% of GDP, down from 1.7% in 2022, as reported by Fitch Ratings. Despite lower commodity prices leading to reduced import taxes, fiscal revenues remained stable at 12.6% of GDP, indicating sustained progress in administrative enhancements. Expenditures declined to 13.9% of GDP, compared to 14.4% in 2022, largely due to reduced spending on goods, services, and transfers following the presidential elections. Moving forward to 2024, the government will continue operating under the 2023 budget as the 2024 budget, approved by Congress, was suspended due to procedural irregularities. With the current budget constraints in mind, Fitch projects a deficit of 1% of GDP for 2024. Unlike previous years, Guatemala heavily leaned on external debt to address its financing requirements in 2023. This reliance stemmed from legislative gridlock, which caused delays in multilateral disbursements, alongside an increase in local-currency yields due to tightening domestic monetary policies. Public debt declined to 28.3% of GDP in 2023 and should also remain relatively stable in 2024 (27.9%) and 2025 (28% - IMF). In contrast to many regional central banks, BanGuat took a gradual approach in transitioning from accommodative policies, aiming to bring the inflation rate to a neutral level of 5.0% by April 2023, where it has since remained. This unique stance reflects the significant impact of imported goods on inflationary pressures, which have subsided. After reaching a peak of 9.9% in February 2023, inflation reverted to its target range of 4%+/-1pp, closing the year at 4.2%, primarily driven by declines in fuel and food prices (Fitch Ratings).

According to the latest data available by the World Bank, the unemployment rate in Guatemala reached an estimated 3% in 2022. However, the country's informal sector grew 60% according to Guatemala's Labor and Social Security Minister. Furthermore, more than half of the population live below the poverty line. The country also has one of the highest rates of malnutrition in the world, one quarter of its adults are illiterate, there is a high level of income inequality, and there is a high rate of organised crime and drug trafficking-related violence.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 95.00102.77111.38119.49128.17
GDP (Constant Prices, Annual % Change) 4.13.43.53.63.7
GDP per Capita (USD) 5,0985,4075,7486,0486,362
General Government Balance (in % of GDP) -1.7-1.7-1.7-1.9-2.0
General Government Gross Debt (in % of GDP) 29.228.327.928.028.1
Inflation Rate (%) n/a6.35.54.14.0
Current Account (billions USD) 1.322.451.951.611.20
Current Account (in % of GDP) 1.42.41.81.40.9

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

Guatemala doesn't have many natural resources, but the country still has some reserves of petroleum, land for agriculture, and some small mineral deposits. Main industries in Guatemala include production of coffee; production of textiles, paper industries, petroleum, pharmaceutical products, and rubber processing; and tourism. The country - which has a small mining industry - extracts copper, zinc, iron and nickel - also has strong geothermic and hydroelectric potential. The agricultural sector accounts for 9.3% of GDP and employs 27% of the active population. Besides coffee, Guatemalan agriculture involves sugar, bananas, cotton, rubber, cardamom and a variety of precious woods and fruits. In recent years, farm communities - mostly indigenous - have been displaced by land inequality, low plantation wages, and due to food insecurity in the palm oil industry. According to Central American Business Intelligence, agricultural activity in Guatemala grew 2.1% in 2023.

The industry sector accounts for 22.6% of GDP and 22% of employment. The industry is primarily focused on the following subsectors: coffee production, textiles, paper industry, petroleum, pharmaceutical products, rubber products, and tourism. The manufacturing sector as a whole accounts for 14% of the country’s value-added (World Bank). As per figures from the Cámara de Industria de Guatemala (CIG), the industrial sector activity increased by 4.1% year-on-year in 2023.

The service sector represents the largest share of GDP (62%) and employs 51% of the population. Key sectors include tourism, health care, customer service, financial services, banking institutions, hospitality, communications, and retail. Tourism is one of the country’s most important sectors, bringing in billions of dollars every year. However, the sector suffered enormously due to the pandemic. Still, the tourism sector experienced significant growth in 2023, welcoming 2.65 million foreign tourists, 4% more than the pre-COVID level. Following Panama, Guatemala possesses the second-largest banking sector in Central America, characterized by a notable concentration among its top players. Approximately 93% of the total financial system assets are controlled by the sector's 18 banks, underscoring the dominant position of the leading institutions (BNamericas).

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 29.2 22.1 48.8
Value Added (in % of GDP) 9.3 22.6 62.0
Value Added (Annual % Change) 2.6 4.6 4.6

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
64/100
World Rank:
75
Regional Rank:
15

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 
 

Country Risk

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Sources of General Economic Information

Ministries
Official list of ministries (in Spanish)
Ministry of Economy (in Spanish)
Ministry of External Relations (in Spanish)
Ministry of Communications, Infrastructure and Housing (in Spanish)
Chamber of Industry (in Spanish)
Chamber of Commerce (in Spanish)
Statistical Office
National Institute of Statistics (in Spanish)
Central Bank
Central Bank of Guatemala (in Spanish)
Stock Exchange
Guatemala Stock Exchange (in Spanish)
Economic Portals
Deguate (Spanish only)
 

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Latest Update: April 2024