International Monetary Fund. Western Hemisphere Dept.
1. COVID-19 came at a time of macroeconomic stability and firming growth. Guatemala proved the steadiest economy in Latin America post-GFC (with an average growth of 3½ percent) and economic momentum was strong pre-pandemic. Robust remittances, soaring investor confidence upon the inauguration of Giammattei’s administration (January 2020) and accommodative fiscal and monetary policies supported growth while keeping inflation expectations firmly anchored. The external position remained strong and the banking system liquid and well capitalized.
International Monetary Fund. Western Hemisphere Dept.
This Selected Issues paper estimates potential output growth and the output gap for Guatemala. Potential output growth averaged 4.4 percent just before the global financial crisis but has since declined to 3.75 percent owing to lower capital accumulation and total factor productivity (TFP) growth. It is estimated at 3.8 percent in 2016, and the output gap has virtually closed. Potential growth is expected to reach 4 percent in the medium term owing to the expected improvements in TFP growth. Policies should also prioritize mobilizing domestic savings to invest and build a higher capital stock.
International Monetary Fund. Middle East and Central Asia Dept.
This Selected Issues paper estimates both Guatemala’s potential output and output gap using a wide range of econometric techniques. The analysis suggests that Guatemala’s potential output growth is about 3.5 percent for the whole sample period and that the output gap is almost closed. Results are highly robust among different methodologies. Among the methods used, several well-known time series filters and two different estimations of a state-space model are included. Additionally, a test for structural breaks in the series of potential GDP is presented. All methodologies conclude that the output gap at the end of 2012 is almost closed at -0.2 percent of potential GDP.
Stephanie Medina Cas, Mr. Alejandro Carrion-Menendez, and Ms. Florencia Frantischek
Several Central American (CADR) central banks with independent monetary policies have adopted policy interest rates as their main instrument to signal their monetary policy stances, often in the context of adopting or transitioning to inflation targeting regimes. This paper finds that the interest-rate transmission mechanism, or the pass-through of the policy rate to market rates, is generally weaker and slower in CADR than in the LA6, the countries selected as benchmarks. A variety of potential factors behind this finding are examined, including the degrees of financial dollarization, exchange rate flexibility, bank concentration, financial sector development, and fiscal dominance. Through panel data analysis, the study suggests that the transmission mechanism can be strengthened by increasing exchange rate flexibility, and, over time, by adopting measures towards reducing financial dollarization, developing the financial sector, and reducing bank concentration.
The natural disasters that hit the country recently caused human losses and had a negative impact on the economy; however, they did not deviate the economic recovery path. Currently, growth in exports and imports is accelerating, remittances are recovering, and international reserves are well above end-2009 levels. The authorities have recently adopted regulations on liquidity and foreign currency credit risk management and have made further progress toward full provisioning of nonperforming loans. Finally, the IMF-supported program has also contributed to the achievement of their economic program goals.
This paper discusses a request from the Guatemalan authorities for an 18-month Stand-By Arrangement (SBA) with total access of SDR 630.6 million (about US$951 million). Guatemala has a strong track record of macroeconomic stability. The economy is open and hence vulnerable to external shocks. The authorities have taken a number of upfront measures to mitigate the impact of the external shock and preserve macroeconomic stability. The program will support the authorities’ policies and provide insurance against significant downside risks.
The paper presents statistical data on comparative social indicators, selected economic indicators, selected national accounts aggregates, summary expenditure and savings, summary consumer price indices, summary operations of the combined public sector, and summary of central government operations of Guatemala. The data on real gross domestic expenditure, labor productivity indicators, trends in unit labor costs, real wages, productivity, and employment, nonfinancial public sector operations, summary accounts of the financial system, detailed balance of payments, and imports by origin, and related economic indices are also presented.
This paper reviews economic developments in Guatemala during 1990–95. In 1993–94, output growth was led by a buoyant services sector while activities in the primary and secondary sectors slowed. Domestic demand grew strongly in 1991–92 owing to a substantial expansion in private investment and an increase in consumption. Growth of domestic demand slowed in 1993–94 because of sluggishness in private fixed capital formation. The rate of inflation fell from 60 percent in 1990 to 11½ percent in 1993–94.
International Monetary Fund. External Relations Dept.
This paper highlights that since its inception in 1956, the International Finance Corporation (IFC) has invested more than US$1.7 billion in nearly 300 enterprises in 62 developing countries in total projects costing about US$9 billion. The IFC is the affiliate of the World Bank, which has been given the specific task of furthering economic development by encouraging the growth of productive private enterprise in developing countries. The paper underscores that IFC plays an essentially catalytic role in generating investment funds from local and foreign sources.
IN EACH OF THE FIVE Central American countries, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua, the sound monetary policies which have in general been pursued in recent years have been helpful in promoting internal and external stability and in ensuring balanced and orderly economic development.1 Since 1950, both agricultural and industrial production have expanded in each of these countries. In several of the countries, the imports of food which formerly were necessary are no longer required, and in normal crop years there now are actually small export surpluses. Social capital has been expanded rapidly. New and better roads have been constructed, more electric power has been produced, and more schools and hospitals have been built since 1950 than in the whole of the preceding 20 years. This expanded social capital will facilitate an even more rapid increase of production in the future.