Investment in Guatemala

Guatemala - Investment

GDP growth records slowest increase since Q4 2020 in Q2

GDP growth lost momentum, falling to 4.1% year on year in the second quarter, from 4.5% in the first quarter. Q2's reading marked the slowest expansion since Q4 2020.

Private consumption growth sped up to 5.4% year on year in Q2 from a 4.0% expansion in Q1. Public spending growth was the slowest since Q1 2022, expanding 1.5% (Q1: +6.8% yoy). Meanwhile, fixed investment growth improved to 2.9% in Q2, from the 1.5% increase in the prior quarter.

On the external front, exports of goods and services growth picked up to 12.4% in Q2 (Q1: +10.1% yoy). Conversely, imports of goods and services growth moderated to 5.3% in Q2 (Q1: +9.9% yoy), marking the worst reading since Q4 2020.

Turning to the third quarter, the economy is expected to have lost some momentum. The Central Bank’s monthly index of economic activity inched down in July–August, while rising inflation throughout the quarter should have dented household consumption. The war in Ukraine and a predicted recession in the United States add further risks to the outlook.

Analysts at the EIU added:

“Guatemala's economic growth will face headwinds both in 2023 and over the medium term from weakness in the US economy, which is the main market for Guatemalan exports and its principal source of remittances. […] We expect growth to average 3.1% in 2023-26, although there are several risks to this outlook. One is a steeper than forecast US downturn in the next two years, as this would constrain economic activity in Guatemala. Another is that global (and hence local) inflation fails to ease as expected, eroding consumer purchasing power even more than we currently expect.”

FocusEconomics Consensus Forecast panelists expect the economy to grow 3.6% in 2022, which is unchanged from last month’s projection. For 2023, our panelists expect the economy to grow 3.1%.