Guatemala: GDP growth records slowest increase in two years in Q4
GDP growth waned to 3.5% year on year in the last quarter of 2022 from 3.8% in Q3, marking the slowest growth since Q4 2020. In 2022 as a whole, Guatemala’s economy expanded 4.1% (2021: +8.0% yoy), slightly below the region’s average growth rate.
The domestic sector contributed positively to economic growth. Household consumption growth moderated to 2.9% year on year in Q4 from 4.0% in Q3. Slower growth in remittances and a less dynamic labor market compared to Q3 likely dragged on private demand. More positively, consumer credit rose in Q4, likely preventing a more significant moderation in spending. Meanwhile, government consumption increased to 10.2% in Q4, from 6.9% in the previous quarter, spurred by infrastructure projects and public sector pay rises. Private investment growth also accelerated, to 6.3% in Q4 from 2.9% in Q3. This acceleration was driven by higher imports of capital goods and strong growth in non-residential construction.
On the external front, exports of goods and services slowed to 2.0% yoy in Q4 from 4.5% in Q3. This likely reflected softer external demand amid a deteriorating global economy. In addition, imports of goods and services contracted 3.1% in Q4, compared with the 4.5% expansion posted in Q3, with reduced demand for fuels playing a significant role in this.
Analysts at the EIU said:
“Guatemala’s economic growth will continue to decelerate this year […], given the slowdown in the U.S., which is its biggest export market and its main source of worker’s remittances (an important driver of private consumption). […] Government consumption growth will also soften this year but will rebound in 2024 and remain broadly stable as a share of GDP until 2027. However, gross fixed investment will rise in 2023, ahead of the general election in June.”