Guatemala: Economic growth accelerates in the second quarter of 2019
Economic growth accelerated to 3.5% in the second quarter, up from the 3.1% acceleration recorded in the first quarter which had marked a one-year low. The print came despite softening domestic demand; however, the external sector’s drag on the economy eased.
Domestic demand expanded at a softer clip in the second quarter compared to the first (Q2: +4.2% year-on-year; Q1: +5.6% yoy), on the back of easing private consumption. Household consumption growth eased from 4.4% in the first quarter to 3.9% in the second, partly due to an unsupportive base effect as private consumption grew at a near three-year high in the same quarter a year prior. Moreover, inflationary pressures intensified in the quarter, which likely weighed on household spending despite accelerating remittances growth in the period. On the other hand, fixed investment shifted into a higher gear (Q2: +7.3% yoy; Q1: +4.2% yoy), on the back of greater investment in the construction sector. Meanwhile, public expenditure rose 2.9% in Q2, up from 2.2% in Q1.
On the external front, net exports were a smaller drag on the economy in Q2, owing to easing import growth. Imports of goods and services increased 3.5% year-on-year in the three months ending in June, more than half the 8.1% expansion recorded in the first quarter; exports of goods and services, meanwhile, fell 0.7% in Q2, but less sharply than the 4.5% contraction in Q1.
Looking ahead, the economy should keep a broadly similar pace of expansion next year, buttressed by an improving external sector and resilient domestic demand. However, risks are tilted to the downside on uncertainty linked to the United States’ immigration policy, which could dent crucial remittances inflows. Moreover, a challenging external environment continues to cloud the outlook further.