Guatemala Economic Outlook
Annual GDP growth should have eased slightly in the final quarter of 2022 from Q3. In October–December, accelerating inflation, softer growth in remittances and tumbling merchandise exports will have weighed on the reading. That said, the economic activity index grew at Q3’s average, supported by sustained expansions in the manufacturing, construction and services sectors. In Q1 2023, the economy should be improving. In January–February, remittance growth accelerated from Q4’s average, which, along with the government’s decision to extend the electricity subsidy, should support private spending. Less positively, in January, the annual economic activity index grew at a softer pace from the previous quarter’s expansion, signaling sluggish domestic output. In addition, the Central Bank’s February rate hike will likely stifle investment.
Guatemala Inflation
Price pressures strengthened in February to 9.9% (January: 9.7%) due to a weaker quetzal and higher food inflation. Looking ahead, inflation should ease from current levels in 2023 on lower global commodity prices, higher interest rates and softer domestic demand. Global commodity price fluctuations pose a risk to the outlook.