Wednesday, May 12, 2021

The Current State of Guatemala's Economy

The national economy has remained perhaps surprisingly robust through the covid pandemic.

GDP contracted by 1.5% in 2020, the second smallest contraction in the Americas after Paraguay, and is expected to rebound by 3.9% in 2021. 

Exports and remittance growth have been key here. (The current account surplus increased to 5.5% of GDP in 2020, from 2.3% in 2019.) 

Average inflation in the first quarter of 2021 was 5.7%, a little over the central bank's target, but this has been fed by higher energy prices, which are expected to be short-lived. (Though inflation has taken a bit of lurch forward recently elsewhere too, e.g. up in the US.) 

The fiscal deficit expanded to 4.9% of GDP in 2020, as government expenditure increased by 17.2%, while revenue fell by 3.8%.

The situation may be complicated by the failure to agree a budget for 2021 (and a falling back on the previous year's budget) with the result that government spending is now capped around 94.3bn quetzales and the previously agreed loans ($20m from the World Bank and $594m from the IMF) are no longer on the table, in congressionally-approved form, that is. 

Yet this appears not to imminently threaten the government's ability to finance the deficit in 2021. International reserves reached $18.5 billion (23.8% of GDP) at the end of last year, equivalent to 10 months of the current external payments.

1 comment:

norm said...

Nice essay. A snapshot in time.