Economy decelerates in Q3

Growth slows but remains robust: The economy lost momentum in Q3, growing 3.5% year on year and decelerating from Q2’s near one-year high 3.7% expansion. Still, Q3’s reading remained in line with Guatemala’s pre-pandemic 10-year growth average.

Rebounding public spending fails to stem broad-based slowdown: Domestically, the slowdown was driven by weaker household demand as tight financing conditions likely dented consumer budgets. Private spending growth cooled to 4.8% in Q3 from Q2’s 5.5%, and fixed investment rose 4.4% in the quarter (Q2: +5.8% yoy). More positively, government spending expanded for the first time in a year, posting a 3.0% increase (Q2: -4.6% yoy). On the external front, growth of exports of goods and services decelerated to 3.6% in Q3 (Q2: 4.2% yoy). Meanwhile, growth of imports of goods and services moderated to 8.2% in Q3 (Q2: +10.0% yoy).

Stable growth ahead, though downside risks linger: Our panelists expect the economy to have ended the year on a high note, expanding at the fastest clip in two-and-a-half years. A continued recovery in public spending and faster fixed investment growth likely underpinned the upturn. Moreover, inflation nearly halved from Q3 and remittance inflows gained traction, boding well for household spending. Turning to 2025, our Consensus is for economic growth to hover around 2024 levels, with sharper rises in public spending and exports offsetting slowdowns in private spending and fixed investment. That said, the timing and size of U.S. tariffs under President Trump are key risk factors as the U.S. is Guatemala’s main trading partner and source of remittances.

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