Guatemala flag Guatemala: Economic and Political Overview

The economic context of Guatemala

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Guatemala GDP grew by 5.5% in 2021, mainly driven by net exports and remittances from the U.S., which were powered both by the country's economic growth and falling unemployment among the Guatemalan population in the United States. Remittances represent around 30% of household income, and their boost should continue to support household consumption, which accounts for 85% of GDP. Still, according to the IMF, GDP growth is expected to slightly decrease to 4.5% in 2022 and 3.8% in 2023. Guatemala's economy receives strong financial support from the U.S. and multilateral lenders; is bolstered by free trade agreements with the U.S. and the E.U.; enjoys a privileged proximity to Mexico and the U.S.; and is recognised as a country with high potential in multiple sectors (tourism, agriculture, mining, hydroelectric and geothermal energy).

Guatemala's public deficit closed at -2.2% of GDP in 2021 and is projected to stay stable in 2022 (-2.6%) and 2023 (-2.4%). Public debt reached 32.1% of GDP in 2021 and will slightly increase in 2021 (31.9%) and 2022 (32.3%). Inflation increased to 4.8% in 2021 and should remain stable at 4.5% in 2022 and 4.3% in 2023. The return of inflation rates to the middle of the government's target window should continue to support consumption in 2022, allowing the central bank to maintain its expansionary policy and facilitating the growth of credit to the private sector, in keeping with the current administration's pro-business agenda. Nevertheless, Guatemala's challenges are numerous: social and political instability, poor infrastructure, corruption, vulnerability to external factors (natural disasters and commodity prices), reliance on low value-added industries and remittances, low fiscal revenues, and a range of social issues that include rural poverty, inequalities, underemployment, informality, and ethnic divisions. The absence of a redistributive fiscal policy also hinders attempts to reduce inequality. In order to face the current crisis related to the COVID-19, the central bank is maintaining a low director rate, but investors are still quite careful. Public demand should increase consequently due to the government plan to support the economy. The major focus of this plan is the infrastructure development (roads, ports, etc) representing 60% of the planned investment.

The unemployment rate in Guatemala was 3.5% in 2020, nearly double the rate of 2019, mainly due to the impacts of the pandemic - particularly in the construction sector, services, and transport. In addition, the country's informal sector grew 60% according to Guatemala's Labor and Social Security Minister. Furthermore, more than half of the population live below the poverty line. The country also has one of the highest rates of malnutrition in the world, one quarter of its adults are illiterate, there is a high level of income inequality, and there is a high rate of organised crime and drug trafficking related violence.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 77.00e77.60e83.3189.2194.08
GDP (Constant Prices, Annual % Change) 3.9e-1.5e5.54.53.8
GDP per Capita (USD) 4,371e4,317e4,5424,7674,927
General Government Balance (in % of GDP) -2.3-4.5-2.2-2.6-2.4
General Government Gross Debt (in % of GDP) 26.531.5e32.131.932.3
Inflation Rate (%) 3.73.2e4.84.54.3
Current Account (billions USD) 1.794.253.552.722.36
Current Account (in % of GDP) 2.35.5e4.33.02.5

Source: IMF – World Economic Outlook Database, October 2021

Note: (e) Estimated Data

Main Sectors of Industry

Guatemala doesn't have many natural resources, but the country still has some reserves of petroleum, land for agriculture, and some small mineral deposits. Main industries in Guatemala include production of coffee; production of textiles, paper industries, petroleum, pharmaceutical products, and rubber processing; and tourism. The country - which has a small mining industry - extracts copper, zinc, iron and nickel - also has strong geothermic and hydroelectric potential. The agricultural sector accounts for 10.2% of GDP and employs 31.3% of the active population. Besides coffee, Guatemalan agriculture involves sugar, bananas, cotton, rubber, cardamom and a variety of precious woods and fruits. In recent years, farm communities - mostly indigenous - have been displaced by land inequality, low plantation wages, and due to food insecurity in the palm oil industry. Despite the pandemic, the agricultural sector grew in 2021, as it benefit from a favourable base effect following poor harvests in 2020, which were mainly an effect of the bad weather experienced throughout the country that year.

The industry sector accounts for 22% of GDP and 18.7% of employment. More than half of the economic activity in Guatemala occurs within four sectors: manufacturing, commerce, private service, and agriculture. The industry is primarily focused on producing the following products: textiles, furniture, petroleum, sugar, processed foods, and chemicals. Although manufacturing was the most affected by the pandemic, mainly due to the decrease of American demand, the industry sector as a whole showed a rebound in 2021. The construction sector, in particular, remained extremely busy due to heightened public investment in infrastructure and increased investment in the sector as a whole.

The service sector represents the largest share of GDP (61.8%) and employs 49.9% of the population. Key sectors include tourism, health care, customer service, financial services, banking institutions, hospitality, communications, and retail. Tourism is one of the country’s most important sectors, bringing in billions of dollars every year. However, the sector suffered enormously in the last couple of years due to the pandemic. Still, the tourism sector started to experience a slow recovery in 2021, as travel restrictions were lifted in European countries and the United States, a path which it is set to continue on in the coming years.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 31.3 18.7 50.0
Value Added (in % of GDP) 10.2 22.1 61.9
Value Added (Annual % Change) 2.9 -1.2 -1.9

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

Find more information about your business sector on our service Market reports (keyword).

 
 

Find out all the exchange rates daily on our service International currency converter.

 
Find out more about Market Analysis about Guatemala on GlobalTrade.net, the Directory for International Trade Service Providers.
 

Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
64/100
World Rank:
75
Regional Rank:
15

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 
 

Country Risk

See the country risk analysis provided by Coface.
 

Return to top

 

Return to top

Any Comment About This Content? Report It to Us.

 

© Export Entreprises SA, All Rights Reserved.
Latest Update: April 2022

Return to top