Guatemala: GDP growth edges higher in Q4 2017 on stronger spending as confidence re-emerges
April 7, 2018
Guatemala’s economy registered a further, if modest, recovery in the fourth quarter of 2017 following a particularly weak second quarter. In annual terms, output grew 2.9% in the fourth quarter, beating the third quarter’s 2.7% expansion. Despite accelerating from the previous quarter, growth was still relatively tepid by recent historical standards. Driving the stronger result in the fourth quarter was heavier spending across the domestic economy. Notably, the fourth-quarter reading hinted that economic activity was gaining traction after last year’s political scandals devastated both consumer and investor confidence.
Household spending underpinned domestic demand in the fourth quarter, growing 3.6% from a year earlier (Q3: 3.1% year-on-year) and bolstered by strong inbound remittances from the United States. Moreover, government spending climbed 6.0% (Q3: -0.8% yoy), largely on the completion of deferred public-sector maintenance and repairs. On the other hand, fixed investment slowed to 1.9% (Q3: +2.4% yoy) despite favorable residential construction metrics.
The external sector fared worse in the fourth quarter as imports of consumer goods shot up, following the sector’s brief turnaround in the third quarter. Exports of goods and services grew 0.4% from a year earlier (Q3: +1.8% yoy) on smaller sugar volumes, while banana volumes rose. Imports grew 1.6% (Q3: -1.2% yoy) as shipments of consumer goods, as well as raw materials and capital goods, climbed. All told, the external sector dragged on headline growth in the quarter, subtracting 0.5 percentage points from the overall reading (Q3: plus 1.0 percentage point).
Full-year growth came in at 2.8% in 2017, down from 3.1% in 2016.
Author: Christopher Thomas, Economist