Guatemala: GDP growth ticks up in Q3 on stronger remittances and exports
January 11, 2018
Guatemala’s economy registered a pick-up in Q3 following a particularly weak first half of 2017. GDP grew 2.7% over the same quarter a year earlier in Q3, coming in above Q2’s nearly seven-year low of 2.3%. Driving the stronger result in the third quarter were heavy remittance inflows from the United States and a turnaround in the external sector. Despite accelerating from the previous quarter, GDP growth in Q3 was weak by historical standards—clocking in as the third-weakest print in five years. Although corruption allegations against President Jimmy Morales and subsequent calls for his ouster likely bruised activity in the quarter, the economy has been struggling to regain traction since Guatemala descended into political crisis more than two years ago.
Household spending underpinned domestic demand in Q3, despite recording its weakest quarter in more than four years. Bolstered by strong remittances and upbeat agricultural output, household spending grew 3.0% from a year earlier (Q2: +3.2% year-on-year). On the other hand, government spending fell 0.5% year-on-year (Q2: +0.2% yoy) as public sector maintenance and repairs were put off. Moreover, fixed investment slowed to 1.2% (Q2: +3.0% yoy) despite strong residential construction metrics.
The external sector experienced a turnaround in Q3, bolstered by agricultural exports. Exports of goods and services grew 1.4% from a year earlier (Q2: +0.6% yoy) on stronger volumes of key export crops—sugar, coffee and bananas. On the other hand, imports contracted 1.1% (Q2: +0.6% yoy) as shipments of fuel, lubricants and raw materials fell in the quarter. As a result, the external sector’s contribution to overall growth in the quarter was 0.8 percentage points (Q2: minus 1.4 percentage points).
Guatemala GDP Forecast
Banguat expects GDP growth of between 3.0% and 4.0% this year. FocusEconomics Consensus Forecast panelists see GDP growing 3.7% in 2018, which is up 0.3 percentage points from last month’s forecast. For 2019, our panelists expect GDP growth to clock in at 3.4%.
Author: Christopher Thomas, Economist