Guatemala: Staff Concluding Statement of the 2022 Article IV Mission
IMF News, April 8, 2022
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- Published: April 8, 2022
Strong economic momentum and overarching assessment
- The Guatemalan economy rebounded strongly in 2021 and should return to its pre-pandemic growth trend in 2022.
- The banking sector remains solid overall with pandemic-related measures appropriately phased out last year.
- The outlook remains broadly positive but is subject to elevated external risks.
- Sustaining the recovery and addressing longstanding social and infrastructure needs is paramount to boost inclusive growth.
- Continuing reforms to improve the business climate are essential to further strengthen the outlook and resilience to various shocks (including climate change-related).
Near-term macroeconomic policy guidance
- Monetary policy:
- Should remain data-driven to maintain inflation expectations anchored.
- Monetary policy normalization must be carefully calibrated amid tighter global financial conditions.
- A clear and consistent communication strategy will help guide market expectations.
- Greater exchange rate flexibility can help absorb external shocks.
- Fiscal policy:
- The fiscal stance embodied by the approved 2022 budget is appropriate.
- Announced initiatives to mitigate higher import prices (gas, oil-related products, small farmers’, and electricity subsidies) are temporary and should consistently aim to target the vulnerable.
- Authorities should stand ready to temporarily re-deploy some of the 2020 social measures if economic conditions worsen.
Medium-term fiscal and social priorities
- Create fiscal space to close social and infrastructure gaps within a sound medium-term fiscal framework by:
- Further increasing tax revenues and improving spending efficiency.
- Building on recent digitalization efforts that have improved transparency and efficiency.
- Rationalizing tax incentives and exemptions.
- Social program targeting and data:
- Staff welcome the pilot program to collect data on poverty, nutrition, and housing conditions in six municipalities and encourage its expansion.
- The authorities’ household survey should better gauge social needs and calibrate Guatemala’s social safety net.
- Priority social spending could be scaled up using existing fiscal space and leveraging the experience gained with the Bono Familia program.
- Institutional capacity:
- Further strengthening institutional capacity to support a result-based approach would help attain targets embodied in the 2020-24 General Policy of the Government.
- Staff recommends technical assistance to strengthen medium-term fiscal policy.
Public investment and infrastructure governance
- Enhance the infrastructure governance framework to increase high-quality investments and achieve long-term inclusive development:
- Require a clear regulatory and institutional framework, robust coordination across levels of government, and sustainable performance throughout asset lifecycles.
- Staff recommend participation in the IMF’s Public Investment Management Assessment (PIMA) program to establish a standardized diagnostic and concrete recommendations.
- The Ministry of Finance agrees to participate in the PIMA program to improve public investment planning with a focus on resilience.
- Strengthen long-term strategic infrastructure vision with focus on projects with highest inclusive growth potential and supported by a medium-term fiscal framework.
Structural reforms to boost medium-term growth and inclusion
- Enhance the business climate and promote investment:
- Reforms improving the judiciary and legislative environment remain important.
- Broad-based transparency and digitalization efforts across public administration are welcomed.
- The passage of the law to facilitate insolvency procedures should promote firm creation.
- Formalizing part-time work—particularly important for female labor force participation—could help lift formalization and create economic opportunities.
- Staff encourage expediting implementation of the 2020-2024 General Policy of the Government and the Economic Recovery Plan.
- A results-based approach could help ensure reforms translate into sustainable outcomes.
Financial sector reforms and supervision
- The banking system remains sound, but supervisory and regulatory reforms should be expedited:
- Amendments to the Banking and Financial Groups Law and the draft law on AML/CFT are pending approval by Congress.
- Staff welcome preparation of the legal framework for Fintech and e-money and encourage speedy implementation to address legal, supervisory, and regulatory challenges.
- Adoption of the new Securities Market Law is important to strengthen foundations for financial markets and related supervision.
Risks to the outlook
- Significant, mostly external, downside risks include:
- New COVID-19 variants.
- De-anchoring of inflation expectations in advanced economies.
- Continued global supply chain disruptions.
- Potential changes to investor risk sentiment leading to abrupt tightening of global financial conditions.
- Elevated and volatile commodity prices, amplified by the war in Ukraine, introducing new uncertainty and potentially accelerating global inflationary pressures and slowing external demand.
- Price pressures on basic goods could affect the most vulnerable.
Selected economic indicators and key statistics (as presented)
- Output:
- Real GDP: 3.9 (2019); -1.5 (2020); 8.0 (2021); 4.0 (2022); 3.6 (2023); 3.5 (2024); 3.5 (2025)
- Domestic demand (contribution, percent)1: 5.5 (2019); -2.2 (2020); 13.0 (2021); 2.5 (2022); 3.2 (2023); 3.8 (2024)
- External demand (contribution, percent): -1.6 (2019); 0.7 (2020); -5.0 (2021); 1.5 (2022); 0.4 (2023); -0.4 (2024); -0.3 (2025)
- Output gap (percent of potential GDP): 0.2 (2019); -3.9 (2020); -0.1 (2021); 0.0 (2022)
- Prices and exchange rates:
- Inflation (average): 3.7 (2019); 4.3 (2020); 4.4 (2021); 4.2 (2022)
- Inflation (end of period): 3.4 (2019); 4.8 (2020); 3.1 (2021); 4.5 (2022)
- Real effective exchange rate ("+" = real appreciation): 3.3 (2019)
- Terms of trade: 5.1 (2019); 7.4 (2020); -7.0 (2021); -3.3 (2022); -4.5 (2023); -1.2 (2024); -1.3 (2025); -1.4 (2026)
- Money and credit:
- M2: 9.6 (2019); 18.9 (2020); 11.6 (2021); 7.1 (2022); 7.5 (2023); 7.3 (2024); 7.0 (2025)
- Credit to the private sector: 4.9 (2019); 6.4 (2020); 12.7 (2021); 6.9 (2022); 7.2 (2023)
- External sector:
- Current account (percent of GDP): 2.3 (2019); 2.7 (2020); 0.1 (2021); 0.8 (2022); 0.9 (2023); 1.0 (2024)
- Trade balance (goods and services): -10.3 (2019); -8.0 (2020); -14.0 (2021); -15.8 (2022); -15.2 (2023); -14.3 (2024); -13.7 (2025); -13.2 (2026); -12.8 (2027)
- Export (goods and services): 17.7 (2019); 16.9 (2020); 17.6 (2021); 19.7 (2022); 19.5 (2023); 18.3 (2024); 17.8 (2025); 17.2 (2026); 16.7 (2027)
- Import (goods and services): 27.9 (2019); 24.9 (2020); 31.6 (2021); 35.5 (2022); 34.7 (2023); 33.2 (2024); 32.0 (2025); 31.0 (2026); 30.0 (2027)
- Remittances: 13.6 (2019); 14.6 (2020); 17.1 (2021); 17.0 (2022); 16.5 (2023); 16.0 (2024); 15.5 (2025); 15.0 (2026); 14.5 (2027)
- Reserves and external financing:
- Net international reserves (US$ billion): 13.8 (2019); 18.5 (2020); 20.9 (2021)
- Stock in months of next-year NFGS imports: 8.6 (2019); 8.2 (2020); 7.8 (2021)
- Central Government finances (percent of GDP unless otherwise specified):
- Total revenue: 11.2 (2019); 10.7 (2020); 12.4 (2021); 12.3 (2022); 12.0 (2023); 11.8 (2024); 11.7 (2025)
- of which: tax revenue: 10.6 (2019); 10.1 (2020); 11.4 (2021); 11.0 (2022)
- Expenditure: 13.5 (2019); 15.6 (2020); 14.0 (2021)
- of which: capital: 3.0 (2019); 2.4 (2020); 2.6 (2021)
- Primary balance: -0.6 (2019); -3.2 (2020); 0.6 (2021); -0.2 (2022)
- Overall balance: -4.9 (2019); -2.3 (2020); -2.0 (2021); -1.9 (2022); -1.8 (2023)
- External financing, net: 1.2 (2019); 1.7 (2020); 0.5 (2021); 0.3 (2022)
- Domestic financing, net: 1.1 (2019); 1.4 (2020)
- Central Government Debt:
- General government gross debt: 26.5 (2019); 31.5 (2020); 30.9 (2021); 30.6 (2022); 30.7 (2023); 30.5 (2024); 30.4 (2025); 30.2 (2026); 30.1 (2027)
- Domestic2: 12.9 (2019); 13.3 (2020); 12.6 (2021); 12.2 (2022)
- Domestic: 14.7 (2019); 18.0 (2020); 17.9 (2021); 17.3 (2022); 17.5 (2023)
- Memorandum items:
- Nominal GDP (QTZ billion): 592.8 (2019); 599.2 (2020); 663.0 (2021); 709.8 (2022); 763.3 (2023); 819.2 (2024); 876.7 (2025); 938.4 (2026); 1,004.4 (2027)
- Nominal GDP (US$ billion): 77.0 (2019); 77.6 (2020); 85.7 (2021)
- US$ exchange rate (average): 7.70 (2019); 7.72 (2020); 7.74 (2021)
- International price of oil (US$ a barrel): 61.4 (2019); 41.3 (2020); 69.1 (2021); 106.8 (2022); 92.6 (2023); 84.2 (2024); 78.5 (2025); 74.7 (2026); 72.5 (2027)
Mission Concluding Statement, April 8, 2022 — IMF Communications Department