Investment in Guatemala

Guatemala - Investment

Economy grows at record pace in 2021, despite a Q4 cooldown

Economic growth cooled to an annual 4.7% in the fourth quarter of 2021 from 8.1% in the third quarter. Looking at the year as a whole, the Guatemalan economy recovered strongly. GDP expanded 8.0% over the prior year, in which the economy contracted 1.8% due to the pandemic and associated lockdowns. The impressive growth reading in 2021 marked the highest since at least 1991, when our records began.

The quarterly slowdown came on the back of softer domestic demand and weaker performance by the external sector. Household consumption expanded 6.0% year on year in the fourth quarter, down from the prior quarter’s 8.7% increase. Public consumption grew 3.4% over the same period a year prior, cooling from the 3.8% expansion recorded in the third quarter. Lastly, fixed investment growth eased from 20.9% in the third quarter to 10.1% in the fourth.

On the external front, exports of goods and services growth weakened to 9.6% in the fourth quarter from 12.9% in the prior period. Imports of goods and services also expanded at a softer clip, increasing 16.4% year on year in the quarter (Q3: +27.0% yoy).

Turning to this year, the economy is forecast to grow at a softer clip as the base effect turns less supportive. The unwinding of Covid-19 restrictions at home and abroad should provide support to aggregate demand. However, the country’s relatively low level of vaccination against Covid-19 and the emergence of new virus strains pose downside risks. The war in Ukraine adds a further risk to the outlook, as commodity prices and fuel inflation are spiking. Furthermore, the government’s unwinding of fiscal relief measures will likely also pull the brakes on rapid economic growth.

FocusEconomics Consensus Forecast panelists expect the economy to grow 3.8% in 2022, which is up 0.2 percentage points from last month’s projection. For 2023, our panelists expect the economy to grow 3.3%.