Despite political Turmoil, Guatemala GDP Closes year at 3.5%

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By LatAm Reports Editor

According to the Bank of Guatemala (Banguat), despite the political situation, economic growth closes the year at 3.5%.

The members of the Monetary Board (MJ) learned of the assessment of the country’s economic performance and confirm that the economy measured by gross domestic product (GDP) closes at 3.5%, down from 4.1% in 2022.

The indicator was officialized by Álvaro González Ricci, and Alfredo Blanco Valdés president and vice president of the Bank of Guatemala (Banguat) and the Monetary Board, who also reported on the performance of some indicators, which confirm the evolution of national production during this year.

Macroeconomic results occur in the context of the economic-political cycle by the election of the new government authorities, deputies and mayors to assume in January, as well as the crisis that has been generated and that has led to widespread uncertainty.

2023 was a year in which global conjunctures were going through and there are lagging effects of Covid-19, there is the conflict between Russia and Ukraine, the rise of oil, wheat, inflation and others. But despite these situations, the resilience of the Guatemalan economy that continues to perform better than that of the peer countries was again demonstrated, so the credibility of the agents and experts in the work that Banguat does about its fundamental objective is maintained, which is to keep inflation within the target,” González Ricci explained when asked about the balance sheet.

Update and calls

González Ricci and Blanco Valdés confirmed that they are receiving information requirements from the International Monetary Fund (IMF), representatives of multilateral banking, and risk-country rating agencies, to know the political situation in the country.

They explained that last Tuesday they spoke with the firm Moody, to which they exposed the current situation and that they consulted on the expected impacts of impacts on the main macroeconomic indicators – and were satisfied with the above.

“There is communication, we have facilitated and facilitated communication with the IMF, multilateral banking and the three risk-country qualifiers, because it is very important that they have the right and first-hand information,” he said.

Asked about the economic scenarios if instability continues, David Samayoa, director of the Department of Macroeconomic Analysis of Banguat, emphasized that this is the reason why a growth range of GDP is managed from 2.5% to 4.5% by 2024, as it involves some considerations on this side.

He said that the country’s economic activity depends heavily on the private sector, which is very resilient, and has been shown in previous periods of crisis that it continues to work dynamically.

Blanco Valdés stressed that there is also a lot of resilience to internal and external events, such as contractions caused by the 2007-2008 financial crisis and the negative growth rate in 2020 due to the pandemic. “From something to aroused later, it would remain tonic, we believe,” he said.

Developments of indicators

On the performance of the most relevant indicators known in the closing assessment, it was commented that GDP would be reaching the average value of 3.5%, but to increase the potential and achieve rates of 5% per year, it is necessary to increase productivity and implement structural reforms, as well as increase foreign direct investment (FDI) plus public and private investment with a long-term vision. In FDI, a closure of $1.6 billion is projected.

The inflation shutdown would be 4.75% with the information available as of November, and 4% by the end of 2024, and the rate of Leader Interest of Monetary Policy Interest remains at 5%, apart from the fact that there is exchange stability at more/less 1.5%.

As for the closure of foreign exchange by family remittances, it will be US$20.25 million – about Q156 billion 195 million – and a share of GDP of 19.6%, while the International Monetary Reserves will close at US$20 billion 770 million, equivalent to eight months of imports.

Bank credit to the private sector – total – maintains a growth of 13.3% and by type of debtor, an increase of 8.9% for the largest company; 10.5% for smaller businesses and microcredits; 7.5% for mortgages and 23.1% for consumption. The average interest rates of the banking system are 9.61% for the smaller business; 8.75% for home mortgages; and 6.61% for the largest business.

As for foreign trade, exports report a fall of -3%, which would be associated with the volume and price factor of raw materials and a greater inventory by buyers, and for imports a decrease of -0.5%. This behavior would also be reflected in the Central American bloc.

Treasury Bonds

In the case of the Treasury bonds – a soar of 2050 – which last Monday recorded a decrease in yield, the president of the Banguat, commented that it was a decrease that cannot be considered as out of the ordinary; clearly what is happening in Guatemala on the electoral issue and this situation, is causing some nervousness in the markets, but that variation cannot be considered as important.

He said that by the end of the day, he had already recovered – the price – that he lowered, a topic that was also dealt with with the delegates of Moodys, because Guatemala has honored the payment of its debt debt, and on a daily basis it departs from the collection the payment of the debt service, which provides certainty to investors. Another issue is that central banks cannot lend to the government, except for situations such as Covid-19 – in 2020 – or in extreme crises. On financial issues there is a lot of certainty, and with what happened to the bonds this week it was clearly the nervousness of the news and quickly returned to normal conditions,” he said.

This article has been translated from the original which first appeared in Prensa Libre