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International Monetary Fund. Western Hemisphere Dept.

In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country.

International Monetary Fund. Western Hemisphere Dept.

2019 Article IV Consultation-Press Release and Staff Report

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.

International Monetary Fund. Western Hemisphere Dept.

KEY ISSUESContext. Guatemala’s economy has performed solidly since the 2008–09 crisis. Output has converged to potential, inflation is under control, and macroeconomic policies remain prudent. However, risks to the outlook are tilted downwards, while buffers are modest and space for counter-cyclical policies is thin. Long-term inclusive growth is constrained by low investment in physical and human capital, institutional weaknesses, and lack of security.Near-term policies are broadly appropriate. With the output gap closed, the broadly neutral fiscal stance is adequate. The monetary stance is slightly expansionary, but inflation is at the bottom of the target range. The authorities should stand ready to tighten monetary policy if inflationary pressures re-emerge.Fiscal sustainability should be enhanced over the medium term. Though the debt-to- GDP ratio remains moderate, the ability to implement counter-cyclical fiscal policies is limited, not least by Guatemala’s high government debt-to-revenue ratio. Debt stabilization requires moderate tightening of the budgetary stance over the medium term. The emphasis should be on revenue mobilization, given the overall low level of spending. Consolidating gains from the 2012 tax reform, which has so far proved disappointing, will be critical.Efforts to upgrade the monetary and exchange policy framework should continue. Anchoring low and stable inflation will require measures to bolster monetary policy transmission, including by expanding exchange rate flexibility. This should provide an additional shock absorber and reduce incentives for dollarization. It would also establish the inflation target as the undisputed primary objective of the central bank.Further strengthening of the financial system is necessary. The 2014 FSAP update found that Guatemala has made significant progress in financial regulation and that the banking system appears to be generally sound. However, efforts are still needed to improve consolidated supervision and the regulation of off-shore banks. The time is also ripe for a phased move to Basel III standards.Structural reforms are vital to achieving long-term inclusive growth. Paving the way towards high, inclusive growth will depend upon raising the low tax-to-GDP ratio to supportpriority public spending, thereby addressing critical social and developmental needs.

International Monetary Fund. Western Hemisphere Dept.

Despite a political crisis, linked to the arrest of the former President and other officials on corruption charges, Guatemala's economy has coped well. Growth and the external position have been boosted by low oil prices and strong remittances, while the fiscal deficit had declined. However, progress on social objectives is lagging. There are downside risks from global uncertainties and domestic policy constraints.

International Monetary Fund. Western Hemisphere Dept.

2018 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Guatemala

International Monetary Fund
The staff report on Guatemala’s 2009 Article IV Consultation and Second Review under the Stand-By Arrangement, and Requests for Modification of Performance Criterion and Consultation Clause are presented. There are signs that the Guatemalan economy is starting to recover. Real GDP growth and inflation are picking up, imports have begun to grow, and net private capital flows have stabilized. Real GDP growth is likely to remain low and inflation subdued. Over the medium term, economic growth is expected to be weaker than prior to the global crisis, and inflation to stabilize at trading partners’ levels.
International Monetary Fund
This paper reviews economic developments in Guatemala during 1990–97. During 1992–97, Guatemala’s economic performance strengthened, with growth rates averaging 4 percent helped by declining inflation, progress in trade and financial reform, and favorable terms of trade. Efforts to improve fiscal and credit policies contributed to reducing the external current account deficit and strengthening the net international reserve position. The authorities succeeded in bringing the combined public sector position to balance in 1995–96. The tax effort was raised from less than 7 percent of GDP in 1994 to 8.7 percent of GDP in 1996.
International Monetary Fund. Western Hemisphere Dept.
Fundamentals remain strong and growth has revived after three years of subpar performance. Improved budgetary execution and monetary accommodation, broadly in line with past staff advice, are providing demand support as the economy navigates weaker terms of trade. Near-term growth is poised for a rebound on the back of fiscal impulse from the 2019 expansionary budget, exports recovery after last year’s slump, and construction-driven investment. Lack of progress on long-delayed business climate and public sector reforms, the Sustainable Development Goals (SDG) agenda, and financial inclusion, dampen medium-term prospects.
International Monetary Fund. Western Hemisphere Dept.
This 2019 Article IV Consultation discusses that structural reforms, strengthened policy frameworks and the ongoing smooth political transition have laid the foundations for sustained growth in El Salvador. The discussions focused on policies that build on these achievements and address fiscal vulnerabilities, boost long-term growth, and strengthen the governance, anticorruption and Anti-Money Laundering and Combating the Financing of Terrorism frameworks. Continued US dollar appreciation led to a significant decline in inflation and widening of the current account deficit. The authorities agreed that debt would continue to drift upward in the absence of measures, and that weaker-than-expected global growth could have a negative impact on the domestic economy. The authorities emphasized their commitment to guarantee a smooth political transition by sharing information with the new administration and by inviting the Audit Office to oversee the handover process. It is recommended to improve the governance and anticorruption frameworks by increasing the fiscal transparency of the 2020 budget laws, strengthening audit and spending controls, and promptly implementing electronic invoicing.