Guatemala: Growth in remittances cools in March
Remittances rose to a record-high USD 1,516.1 million in April, with annual growth accelerating to 23.1% year on year in the month (March: +16.1% yoy). Furthermore, on a 12-month rolling basis, remittances increased 29.7% year-on-year in April, down from March’s 33.2% rise.
Remittances are a key source of income for Guatemalan families and tend to follow labor market trends in the United States, where the majority of remittance payments originate from. The U.S. economy is therefore expected to support remittances and support the Guatemalan economy; however, softer growth in the U.S. would weigh on inflows and thus private consumption which is a key engine of growth for the Guatemalan economy. The war in Ukraine adds a further downside risk.
Analysts at the EIU commented:
“It is also in line with EIU’s expectation of an economic slowdown in the US and fiscal and monetary tightening, which will constrain remittances. However, it does not bode well for household consumption in the near term, given the recent rise in oil prices owing to the Russia-Ukraine conflict. Guatemala is dependent on oil imports and a lack of government energy subsidies means that higher energy prices will erode purchasing power and dampen domestic demand. Higher commodity prices will also push up the cost of imported consumer goods. These risks are partially mitigated by the fact that favourable local conditions have contained food prices.”