GDP grows at the slowest clip in over three years in Q4

GDP growth halved to 2.0% year on year at the tail-end of 2023 from an upwardly revised 4.0% in the third quarter. Q4's reading marked the softest growth since Q3 2020. As a result, economic momentum slowed overall in 2023 to 3.5% (2022: +4.2%).

Looking at available data, Q4’s moderation was broad-based. Private consumption growth ebbed to 4.7% in Q4 (Q3: +5.0% yoy), and fixed investment rose by 6.2% in the quarter, cooling from Q3’s whopping 10.4% expansion—over three-year low remittance inflow growth dented household budgets. Meanwhile, public spending swung into contraction, falling 9.5% year on year (Q3: +1.3% yoy), which was the largest decline in nearly 20 years. On the external front, exports of goods and services contracted at a faster 5.3% in Q4 (Q3: -2.1% yoy). Meanwhile, imports of goods and services rose at a two-year high pace of 11.3%, following Q3’s 8.1% increase.

Economic growth is seen dipping below 2023’s rate in 2024 as domestic demand decelerates: Our Consensus is for weaker private consumption growth and near-flat government spending. A rebound in exports should support momentum, however. The outlook for Guatemala’s economy continues to hinge on the strength of the U.S. labor market.

Analysts at the EIU commented on the outlook: “We expect local GDP growth to slow in 2024 as a tighter US labour market causes remittances flows to Guatemala to soften, resulting in slightly weaker private consumption.”

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