Guatemala: Economic growth steadies in Q1
July 7, 2017
The economy started the year on a path of moderate growth, expanding 3.0% in Q1 over the same period of the previous year. The result matched the increase seen in Q4 2016 and missed FocusEconomics panelists’ expectations of a 3.4% year-on-year rise. The expansion was spearheaded by the domestic sector, while the external sector dragged on overall growth despite exports having risen at the fastest since Q2 2015.
In Q1, Guatemalan households benefited notably from record growth in remittance inflows, while steady credit growth and strong gains in Social Security affiliations further shored up private spending. Nonetheless, private consumption only grew 3.3% in the first quarter, which was below the 4.0% increase recorded in Q4 and the smallest expansion since Q4 2013. Conversely, fixed investment growth leaped from a 1.4% rise in Q4 to a 6.5% increase in Q1, marking the highest reading in a year. Government consumption, however, swung from a 1.6% expansion in Q4 to a 3.9% drop in Q1. Barring Q1’s drop, public spending is seen picking up in upcoming quarters as the government loosens its fiscal stance.
The external sector’s contribution to overall growth deteriorated markedly in Q1, swinging from plus 0.8 percentage points in Q4 to minus 0.6 percentage points. This was the result of bumper growth in imports (Q1: +4.9% year-on-year; Q4: +0.9% yoy), which benefited from strong domestic demand for consumer and capital goods. Nonetheless, exports growth was also strong in Q1, reaching a nearly two-year high of 6.5% (Q4: +1.4% yoy).
Author: Christopher Mc Innes, Economist