Guatemala Economic Forecast

The GDP growth rate in Q4 was slightly below that of Q3. While government spending and fixed investment accelerated in Q4, there was a slowdown in household consumption. On the external front, export growth decelerated and imports contracted. Looking at Q1, growth likely continued at a solid pace. In the quarter, the monthly indicator of economic activity expanded at a slightly faster pace than in Q4. Furthermore, strong remittances inflows and a higher average economic activity confidence index in comparison to Q4 likely had a positive impact on private consumption and investment. For Q2, the economy is set to decelerate due to the weaker performance of trading partners and a likely cooling of the U.S. labor market limiting remittances inflows and thus weighing on private consumption.

Inflation eased to 8.3% in April (March: 8.7%) due to decreased price pressures for food. Our panelists expect inflation to ease further as 2023 progresses on a strong base effect and a reduction in imported inflation. Key factors to watch include extreme weather events, commodity price volatility and the persistence of second-round effects.