Guatemala: Economy grows at quickest pace since Q2 2016 in the third quarter
January 10, 2019
The economy picked up some steam in the third quarter on resilient domestic demand, which offset a weaker external sector. In the third quarter of 2018, the economy grew 3.5% over the same period a year earlier, slightly up from the revised 3.4% expansion clocked in the second quarter (previously reported: +3.3% year-on-year).
Domestically, private consumption growth eased slightly but remained strong overall, with household expenditure growing 5.1% year-on-year in the July-September period (Q2: +5.3% yoy). On the other hand, government expenditure accelerated from a 5.6% expansion in Q2 to a 6.0% yoy increase in the third quarter, while fixed investment grew 4.4% in the quarter over the same period a year prior (Q2: +3.0% yoy).
Externally, exports of goods and services contracted a sharp 2.2% in the third quarter (Q2: -1.6% yoy), while growth in imports of goods and services accelerated to 7.5% (Q2: +5.7% yoy). Subsequently, the external sector dragged on the headline growth reading by 3.5 percentage points, more than the 2.8 percentage-point detraction in the previous quarter.
Looking ahead, the economy is expected to grow at a robust pace this year on the back of resilient domestic demand. However, uncertainty surrounding U.S. immigration policy clouds the outlook as remittances from workers abroad is an import source of household income and driver of private consumption. The lion’s share of remittances originates from the neighbor to the north.
Guatemala GDP Forecast
Banguat expects growth of between 3.1%–4.1% in 2019. Last month, FocusEconomics Consensus Forecast panelists expected growth of 3.1% in 2019, which was down 0.1 percentage points from the previous month’s forecast. For 2019, our panelists expected growth of 3.3%. New forecasts will be available on 15 January.
Author: Jan Lammersen, Economist