Guatemala Economic Forecast

In Q2, the economy likely expanded at a robust rate. The average annual expansion in economic activity was broadly unchanged in the quarter from Q1’s average. Household consumption should have benefited from lower inflation and strong remittance inflows. That said, exports fell more year on year in April–June than in Q1. In politics, on 20 August, Bernardo Arévalo won the presidential election. However, days afterward, Arévalo’s party, Seed Movement, was suspended by the government. After backlash from the Organization of American States, the electoral tribunal lifted the suspension in early September—but only until 31 October. If Arévalo’s party is suspended again, his legislators may be forced to sit as independents, diminishing his influence in Congress. Nevertheless, Arévalo is set to assume office on 14 January with macroeconomic policies aligning with current ones.

Inflation was stable at July’s 4.5% in August. Our panel expects a moderation in average inflation in the current year compared to the previous one due to softer demand and improved international supply chains. Lower-than-expected rains due to El Niño are an upward risk, as is the persistence of recent increases in energy commodities prices.