{
  "title": "IMF Executive Board Concludes 2021 Article IV Consultation with Guatemala",
  "publication": "IMF News, June 11, 2021",
  "sourceUrl": "https://www.imf.org/en/news/articles/2021/06/11/pr21170-guatemala-imf-executive-board-concludes-2021-article-iv-consultation",
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  "summary": "Real GDP is estimated to have contracted by 1½ percent in 2020.",
  "publishDate": "2021-06-11",
  "sections": [
    {
      "heading": "Economic impact and recent performance",
      "content": "- Real GDP is estimated to have contracted by 1½ percent in 2020.\n- The current account balance increased to 5½ percent of GDP in 2020 (from 2.4 percent in 2019).\n- Near-term inflation and expectations:\n  - Temporary factors pushed headline inflation upward in 2020, but inflation expectations have remained well-anchored, reflecting soft demand conditions and core inflation.\n  - Near-term inflation is set to converge to the mid-point of the target band (4 +/-1 percent) as supply shocks wane.\n- Remittances and external sector:\n  - Resilient remittance inflows supported the economy in 2020.\n  - Stronger terms of trade, imports compression, and robust agriculture, food and chemical exports contributed to the lower trade deficit in 2020.\n- Growth outlook:\n  - Economic activity is projected to expand by 4½ percent in 2021.\n  - Over the medium term, growth is projected to stabilize at its pre-COVID potential rate of 3½ percent by 2023.\n- Projections for the current account:\n  - As the pandemic recedes, the current account balance is expected to deteriorate to -0.6 percent of GDP over the medium term due to lower exports growth, improving imports, and an increase in the FDI payout."
    },
    {
      "heading": "Policy response during the pandemic",
      "content": "- Fiscal policy:\n  - Authorities implemented an overall package of 2.3 percent of GDP to enhance healthcare capacity, secure lifelines, and sustain demand.\n  - Fiscal stimulus was promptly deployed to support the economy and the most vulnerable.\n- Monetary policy and financial measures:\n  - The central bank lowered the policy rate by 100 basis points to a historic low of 1¾ percent.\n  - The central bank provided additional liquidity to support payment systems and meet precautionary demand for cash.\n  - The monetary board temporarily eased credit risk regulations to facilitate renegotiation of loans and allowed banks to record interest from restructured loans on an accrual basis.\n- Other measures:\n  - Large-scale government support was deployed despite already weak social indicators; poverty and malnutrition further deteriorated following COVID-19 and two major hurricanes in November 2020."
    },
    {
      "heading": "Executive Board assessment and policy recommendations",
      "content": "- Overall assessment:\n  - Directors commended authorities for maintaining sound macroeconomic policies and for implementing a swift, unprecedented policy response that allowed an early reopening.\n  - Directors agreed the near-term outlook is favorable but hinges on vaccination progress.\n  - Directors emphasized securing more inclusive, sustainable growth, building resilience to natural disasters, and ensuring debt sustainability.\n- Fiscal policy recommendations:\n  - Maintain supportive macroeconomic policies in the near term until the recovery takes hold, while guarding against downside risks from the pandemic.\n  - As fiscal stimulus is gradually withdrawn, scale up social programs and infrastructure expenditure to reduce poverty and boost potential growth.\n  - Enhance revenue mobilization and spending efficiency to expand fiscal space.\n  - Strengthen tax controls, tackle contraband, and reduce red tape and corruption.\n  - Enhance transparency, governance, quality of public services, and procurement cost-effectiveness.\n- Monetary and financial sector recommendations:\n  - Continue accommodative monetary conditions provided inflation expectations remain well-anchored.\n  - Guard against unintended consequences from last year’s monetization of part of the fiscal deficit.\n  - Monitor banks’ asset quality closely and remain vigilant to financial stability risks.\n  - Prompt passage of the banking law and the revised AML/CFT law was encouraged to enhance financial stability and integrity.\n- Structural and resilience recommendations:\n  - Expedite implementation of the authorities’ reform agenda to lift potential growth, improve the business climate, foster employment, and facilitate external rebalancing.\n  - Complement climate change mitigation and adaptation efforts with an enhanced disaster risk management strategy and effective implementation of emission reduction programs."
    },
    {
      "heading": "Risks to the outlook",
      "content": "- Downside risks:\n  - Slower vaccine rollout and/or new virus strains could prolong the global and domestic recovery.\n  - Protracted worsening in poverty and malnutrition could trigger social discontent.\n  - Further natural disasters could weigh on the recovery and livelihoods.\n  - Premature withdrawal of financial sector support measures might curtail banks’ profitability and credit flow to the recovery.\n- Upside possibility:\n  - A quick resolution to the pandemic, alongside faster-than-expected progress with business reforms, could further lift investment and growth."
    },
    {
      "heading": "Selected economic and social indicators",
      "content": "- I. Social and Demographic Indicators\n  - Population 2020 (millions): 17\n  - Gini index (2014): 48\n  - Percentage of indigenous population (2018): 44\n  - Life expectancy at birth (2018): 74\n  - Population below the poverty line (Percent, 2014): 59\n  - Adult illiteracy rate (2014): 19\n  - Rank in UNDP development index (2019; of 189): 127\n  - GDP per capita (US$, 2020): 4,603\n\n- II. Economic Indicators — Selected annual percent changes and levels (2017–2022, as presented)\n  - Real GDP: 2017: 3.1; 2018: 3.3; 2019: 3.9; 2020: -1.5; 2021: 4.5; 2022: 4.0\n  - Consumer prices (end of period): 2017: 5.7; 2018: 2.3; 2019: 3.4; 2020: 4.8; 2021: 3.6\n  - M2: 2017: 8.4; 2018: 9.4; 2019: 9.6; 2020: 18.9; 2021: 7.8; 2022: 6.3\n  - Credit to the private sector: 2017: 3.8; 2018: 7.0; 2019: 4.9; 2020: 6.4; 2021: 6.8; 2022: 7.3\n  - Gross domestic investment (percent of GDP): 2017: 13.6; 2018: 13.8; 2019: 14.3; 2020: 12.9; 2021: 14.1; 2022: 14.5\n  - Gross national saving (percent of GDP): 2017: 14.7; 2018: 14.6; 2019: 16.6; 2020: 18.4; 2021: 16.5; 2022: 16.2\n  - Current account balance (percent of GDP): 2017: 0.9; 2018: 5.5; 2019: 1.7; 2020: (table shows 5.5 earlier in text)\n  - Trade balance (goods, percent of GDP): 2017: -9.5; 2018: -10.9; 2019: -10.3; 2020: -7.6; 2021: -9.9; 2022: -10.4\n  - Exports (percent of GDP): 2017: 13.5; 2018: 13.2; 2019: 13.3; 2020: 12.7\n  - Imports (percent of GDP): 2017: 23.0; 2018: 24.1; 2019: 23.2; 2020: 21.2; 2021: 23.1\n  - Other (net) (percent of GDP): 2017: 10.2; 2018: 11.5; 2019: 12.6; 2020: 13.0; 2021: 13.1\n  - Of which: remittances (percent of GDP): 11.4 (year not explicitly labeled in table)\n  - Net International Reserves (Stock in months of next-year NFGS imports): 2017: 6.0; 2018: 6.5; 2019: 8.6; 2020: 9.2; 2021: 8.8; 2022: 8.5\n  - Central Government Revenues (percent of GDP): 2017: 11.3; 2018: 11.2; 2019: 10.7; 2020: 10.6; 2021: 11.0\n  - Central Government Expenditures (percent of GDP): 2017: 12.8; 2018: 15.6; 2019: 14.0\n  - Central Government Current expenditure (percent of GDP): 2017: 10.5\n  - Central Government Capital expenditure (percent of GDP): 2017: 2.6; 2018: 2.7; 2019: 3.0; 2020: 2.8\n  - Primary balance (percent of GDP): 2017: -3.2\n  - Overall balance (percent of GDP): 2017: -1.9; 2018: -2.2; 2019: -4.9; 2020: -2.8\n  - Central Government Debt (percent of GDP): 2017: 25.1; 2018: 26.5; 2019: 31.5; 2020: 32.4; 2021: 33.4\n  - Of which external (percent of GDP): 2017: 11.8; 2018: 14.4\n  - Of which domestic 1/ (percent of GDP): 2017: 13.7; 2018: 15.0; 2019: 18.0; 2020: 17.9; 2021: 19.0\n  - Memorandum: GDP (US$ billions): 2017: 71.6; 2018: 73.2; 2019: 77.0; 2020: 77.6; 2021: 82.1; 2022: 86.0\n  - Output gap (% of GDP): 2017: -2.1; 2018: -0.4\n  - Net international reserves — Stock over short-term debt, residual maturity: 1.8 (year not explicitly labeled)\n  - Financial account balance (Net lending (+)): 0.6; 4.4 (years not explicitly labeled)\n  - Change in reserves assets (Increase (+)): 4.1 (year not explicitly labeled)\n\n- Notes:\n  - Sources listed: Bank of Guatemala; Ministry of Finance; and Fund staff estimates and projections.\n  - Footnote 1/ Does not include recapitalization of obligations to the central bank.\n\nIMF Executive Board Concludes 2021 Article IV Consultation with Guatemala — Press Release No. 21/170, June 11, 2021.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- IMF COVID-19 Hub\n- Policy Tracker\n- Financial Assistance\n- Questions & Answers\n- Guatemala and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.IMF.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2021/06/11/pr21170-guatemala-imf-executive-board-concludes-2021-article-iv-consultation"
    }
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    "Published: June 11, 2021",
    "Real GDP is estimated to have contracted by 1½ percent in 2020.",
    "The current account balance increased to 5½ percent of GDP in 2020 (from 2.4 percent in 2019).",
    "Near-term inflation and expectations:",
    "Remittances and external sector:",
    "Growth outlook:",
    "Projections for the current account:",
    "Fiscal policy:",
    "Monetary policy and financial measures:",
    "Other measures:",
    "Overall assessment:",
    "Fiscal policy recommendations:",
    "Monetary and financial sector recommendations:",
    "Structural and resilience recommendations:",
    "Downside risks:",
    "Upside possibility:",
    "I. Social and Demographic Indicators",
    "II. Economic Indicators — Selected annual percent changes and levels (2017–2022, as presented)",
    "Notes:",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[IMF COVID-19 Hub](https://www.imf.org/en/Topics/imf-and-covid19)",
    "[Policy Tracker](https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19)",
    "[Financial Assistance](https://www.imf.org/en/Topics/imf-and-covid19/COVID-Lending-Tracker)",
    "[Questions & Answers](https://www.imf.org/en/About/FAQ/imf-response-to-covid-19)",
    "[Guatemala and the IMF](http://www.imf.org/external/country/GTM/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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