Guatemala: Run-off seems guaranteed for tainted presidential elections; economic consequences uncertain
June 11, 2019
President Jimmy Morales’ corruption-scandal ridden presidency will come to an end when Guatemalans head to the polls on 16 June to elect a new president and the 160 members of Congress. That said, the constitutional court’s decision to bar some candidates, including anti-graft crusader Thelma Aldana, from running raised concerns about future steps to tackle endemic corruption. Meanwhile, a run-off scheduled for 11 August seems extremely likely, while there has been little talk of concrete policies among the front-runners.
Opinion polls show that Sandra Torres and Alejandro Giammattei currently lead a crowded field of roughly 20 candidates, after two of the most popular candidates—Aldana and Zury Ríos, daughter of a former dictator—were banned from the election. Torres is the candidate of the social-democrat, social-Christian National Unity of Hope party (UNE). Analysts expect a Torres victory would imply general policy continuity on social affairs; however, the outlook on pro-market and anti-corruption reforms would be less certain. Meanwhile, Torres proposed austerity policies, as part of efforts to keep fiscal balances in check, but also stated she would extend tax exemptions to the textile industry in a bid to support the industry and increase employment. Guatemala’s fiscal shortfall and public debt are among the lowest in the region and the FocusEconomics Consensus Forecast panelists expect both to remain manageable over the forecast horizon. In addition, Torres has proposed greater regulatory transparency, which would likely boost investment and private sector activity. A more extensive public-private partnership in terms of investment that goes beyond infrastructure and includes sectors such as agriculture and tourism would further buttress the private sector.
While the policies of her closest rival, Alejandro Giammattei, the leader of the right-wing Vamos party, are largely unknown, he has also proposed a private-public partnership, that would primarily focus on infrastructure and which should boost investment. Additionally, Giammattei argues in favor of tackling growing inequality in the country and strengthening private property.
In summary, with nearly 20 people vying for the top job, a run-off election, scheduled for 11 August, looks highly likely. Although Torres is currently leading the pack, she could struggle in a second-round ballot. Many voters have indicated that they are unlikely to vote for her, while Giammattei scores a higher favorability in opinion polls, which could open the door to coalition-building around Torres’ opponent.
Guatemala GDP Forecast
Although political uncertainty is likely to remain elevated in the months ahead, the Guatemalan economy is expected to continue growing at a steady pace this year and next year on the back of resilient domestic demand. The FocusEconomics Consensus Forecast panel expects the economy to grow 3.1% in 2019 and to expand 3.2% in 2020.
Author: Jan Lammersen, Economist