Economic Outline

Economic Indicators

Guatemala is the largest economy in Central America in terms of both population and economic activity. The country has seen stable growth, averaging 3.2% from 2014 to 2023, surpassing the Latin American and Caribbean average, thanks to sound fiscal and monetary management. In 2023, economic growth moderated to an estimated 3.5% in 2023, down from 4.2% one year earlier. According to the Central Bank, GDP expanded by an estimated 3.7% in 2024, benefiting from reduced uncertainty, increasing remittances, and higher government expenditure. As per the World Bank, over the forecast period, growth should remain stable, with government consumption and investment expected to play a larger role, while the contribution of private consumption will slow down due to slower remittance growth and higher government spending.

According to the latest estimates from Fitch Ratings, the central government fiscal deficit decreased to 1.0% of GDP in 2024, down from 1.3% in 2023 and below the 2.6% projected in the revised budget passed in August 2024. Fiscal revenues averaged 12.4% of GDP over the past four years, up from 11.2% in 2019, indicating a potential stabilization of gains from tax administration efforts. Expenditures as a share of GDP fell to 13.4% from 13.7% in 2023, as authorities operated with the reduced 2023 budget for most of 2024. The overall general government fiscal balance was 0.0% in 2024, due to the surplus in the social security institute. Domestic borrowing resumed in 2024 after negative net issuance in 2023, and combined with larger-than-usual Eurobond issuance and a lower fiscal deficit, led to increased deposit accumulation. The 2025 budget projects debt issuance to double to USD 3.2 billion, mostly in the local market. The debt-to-GDP ratio is expected to rise slightly to 25.2% in 2025, up from 24.5% in 2024. Interest/revenue is forecasted to remain stable at 8.9%. Fitch estimates the current account surplus moderated to 2.5% of GDP in 2024, down from 3.1% in 2023, due to wider deficits in trade and services balances, partially offset by larger remittance inflows. Inflation has decreased since mid-2023, falling below the official target of 4% +/- 1 percentage point, reaching 1.7% year-on-year in December 2024, driven by lower imported inflation and its secondary effects.

Despite its progress, Guatemala still faces several structural challenges, including low and inefficient social expenditure, a lack of dynamism in the labour market, and low productivity, which is largely attributed to inadequate infrastructure. According to the latest data available by the World Bank, the unemployment rate reached an estimated 2.3% in 2023. However, informality reached 70.3% in 2023, while labour force participation was at 59%, with a significantly lower rate for women at 39.7%. This poses a challenge to efforts aimed at reducing poverty and inequality . Guatemala’s GDP per capita grew by 1.9% from 2014 to 2023, while the average for Latin America and the Caribbean (LAC) was 0.3% during the same period. Nevertheless, poverty based on the upper-middle-income country poverty line (USD $6.85/day per capita, 2017 PPP) remains among the highest in the region, affecting 55.2% of the population, a slight change from 55.4% in 2014. Human capital outcomes have seen minimal improvement during this period, especially for racial minorities. Child malnutrition remains a significant issue, with 44% of children under five suffering from stunting in 2022 (data World Bank).

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