Guatemala: Economy grows at quickest pace since Q2 2016 in the second quarter
October 4, 2018
The Guatemalan economy picked up significant steam in the second quarter on the back of strong domestic demand, as the external sector weakened. In Q2 the economy grew 3.3% over the same period a year ago, up from the first quarter’s multi-year low of 2.0%.
On the domestic front, the pace of growth in private consumption nearly doubled to 5.9% year-on-year (Q1: +3.0% year-on-year), supported by double-digit remittances growth. Government expenditure and fixed investment growth also shifted into a higher gear, with public consumption growing 4.7% (Q1: +3.0% yoy) and fixed investment increasing 3.5% (Q1: +1.8% yoy).
On the external front, exports contracted at a sharper pace than in the first quarter (Q2: -5.0% yoy; Q1: -2.8% yoy) while imports swung from a 2.4% contraction in Q1 to a 5.6% expansion in the second quarter. As a result, the external sector dragged sharply on the headline GDP figure, contrasting the small positive contribution in the first quarter.
Looking ahead, robust domestic demand is expected to keep economic growth afloat in the second half of this year and next. However, U.S. immigration policy uncertainty clouds the outlook as it could affect the inflow of remittances, an important source of household income and a driver of private consumption.
Guatemala GDP Forecast
Banguat expects growth of between 2.8%–3.2% in 2018 and 3.1%–4.1% in 2019. FocusEconomics Consensus Forecast panelists expect growth of 3.1% in 2018, which is unchanged from last month’s forecast. For 2019, our panelists expect growth to clock in at 3.3%, also unchanged from last month’s projection.
Author: Jan Lammersen, Economist