{
  "title": "IMF Executive Board Concludes 2022 Article IV Consultation with Guatemala",
  "publication": "IMF News, June 7, 2022",
  "sourceUrl": "https://www.imf.org/en/news/articles/2022/06/07/pr22186-imf-executive-board-concludes-2022-article-iv-consultation-with-guatemala",
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  "summary": "IMF Executive Board Concludes 2022 Article IV Consultation with Guatemala",
  "publishDate": "2022-06-07",
  "sections": [
    {
      "heading": "Key findings on 2020–2021 performance and structural gaps",
      "content": "- The Executive Board concluded the Article IV consultation on June 6, 2022 and considered and endorsed the staff appraisal without a meeting on a lapse-of-time basis.\n- The Guatemalan economy showed \"remarkable resilience\" during the pandemic and nearly returned GDP to its pre-pandemic projected trend driven by unprecedented policy support, early reopening, and a favorable external environment including strong remittances.\n- Real GDP growth:\n  - 2021: 8 percent rebound.\n  - 2022 projection (page text): 4 percent.\n  - 2023 projection (page text): converge to 3½ percent.\n- Inflation and external sector in 2021:\n  - Inflationary pressures were contained in 2021 as temporary pandemic and climate-related factors faded.\n  - Current account surplus declined to 2.5 percent of GDP in 2021 due to a substantial increase in imports and weaker terms of trade despite strong remittances.\n- Fiscal developments:\n  - The primary fiscal balance moved into surplus in 2021 largely due to better-than-expected tax revenues and significant tax administration gains.\n- Financial sector:\n  - The banking sector remains solid overall; pandemic-related measures were appropriately phased out in 2021.\n- Persistent gaps:\n  - Social indicators likely deteriorated during the pandemic.\n  - Longstanding infrastructure and social gaps remain."
    },
    {
      "heading": "Outlook, projections, and risks",
      "content": "- Near-term outlook:\n  - Growth projected at 4 percent in 2022 supported by a favorable policy mix, recovery of lagging sectors, favorable credit conditions, and resilient U.S. economy sustaining remittances.\n  - Growth projected to stabilize at its pre-COVID potential rate of 3½ percent by 2023.\n- Inflation:\n  - Driven by external price pressures, inflation is projected to increase but remain within the target band (4 ± 1 percent), averaging 4.4 percent in 2022.\n- Current account:\n  - Projected to move into deficit (around ½ percent of GDP) in response to higher import prices and slower growth in remittances.\n- Downside risks highlighted:\n  - Highly uncertain external outlook including from the war in Ukraine.\n  - De-anchoring of inflation expectations in advanced economies.\n  - Continued global supply chain disruptions.\n  - Potential abrupt tightening of global financial conditions from changes in investor risk sentiment.\n  - Elevated and volatile commodity prices accelerating global inflation and slowing external demand.\n  - Social discontent from rising food and energy prices affecting the most vulnerable."
    },
    {
      "heading": "Executive Board assessment and policy guidance",
      "content": "- Overall assessment:\n  - The economy was remarkably resilient during the pandemic; near-term outlook is favorable, but long-standing social and infrastructure gaps remain.\n- Fiscal policy:\n  - The fiscal stance in 2022—including temporary measures to mitigate higher import prices and an increase in the infrastructure budget—are appropriate.\n  - If economic conditions worsen, authorities should consider temporarily redeploying some targeted 2020 social measures.\n  - Accelerating efforts to address social gaps is crucial while maintaining fiscal sustainability.\n  - Recommendations to create fiscal space: increase tax revenues further and improve spending efficiency; SAT should build upon recent tax administration improvements.\n  - Spending reforms recommended: increase budget flexibility, bolster procurement cost-effectiveness, improve coverage and quality of public services, and rationalize tax incentives and exemptions.\n  - Consider exploring additional upgrades to the medium-term fiscal framework such as multi-annual budget planning and formalization of an explicit fiscal anchor.\n- Monetary and exchange rate policy:\n  - Monetary policy normalization must be carefully calibrated amid tighter global financial conditions and remain data driven to maintain inflation expectations anchored.\n  - A clear and consistent communication strategy is recommended to guide market expectations.\n  - Greater exchange rate flexibility can help absorb external shocks.\n- Financial supervision and regulatory framework:\n  - The SIB should continue to closely monitor nonperforming loans and potential financial stability risks, including those from tighter global financial conditions.\n  - Reforms to improve the supervisory and regulatory framework should be expedited.\n  - Pending legislation: Banking and Financial Groups and AML/CFT laws (align with Basel III and FATF standards) are pending Congress approval.\n  - Support for speedy implementation of legal framework for Fintech and e-money; welcome adoption of the new Securities Market Law to support market development and strengthen supervision.\n- Structural reforms to boost investment and inclusion:\n  - Passage of law to facilitate insolvency procedures should promote firm creation.\n  - Construction Single Window to ease issuance of construction licenses, efforts to boost affordable housing, and streamlining the PPP framework should bolster private investment.\n  - Formalizing part-time work could help lift formalization.\n  - Staff encourage expedited implementation of the 2020-2024 General Policy of the Government and the Guatemala No Se Detiene Plan to improve business climate and security.\n  - Governance and anti-corruption: reforms improving judiciary and legislative environment, including strengthening the Attorney General’s Office, remain important.\n  - Broad-based transparency and digitalization efforts across public administration are welcomed; a results-based approach is recommended to translate efforts into sustainable outcomes."
    },
    {
      "heading": "Selected economic and social indicators (Table 1: selected series)",
      "content": "- Income and Prices (annual percent change, unless otherwise indicated):\n  - Real GDP: 2018: 3.4; 2019: 4.0; 2020: -1.8; 2021: 8.0; 2022 (projection column in table): 3.6.\n  - Consumer prices (average): 2018: 3.8; 2019: 3.7; 2020: 3.2; 2021: 4.3; 2022 (table): 4.4.\n  - Consumer prices (end of period): 2018: 2.3; 2019: 4.8; 2020: 3.1; 2021: 4.5.\n- Monetary Sector:\n  - M2: 2018: 9.4; 2019: 9.6; 2020: 18.9; 2021: 11.6; 2022 (table): 7.1; 2023 (table): 7.5.\n  - Credit to the private sector: 2018: 7.0; 2019: 4.9; 2020: 6.4; 2021: 12.7; 2022 (table): 6.9; 2023 (table): 7.2.\n- Saving and Investment (in percent of GDP, unless otherwise indicated):\n  - Gross domestic investment: 2018: 13.8; 2019: 14.3; 2020: 13.3; 2021: 17.0; 2022 (table): 16.2; 2023 (table): 15.1.\n  - Private sector investment: 2018: 12.2; 2019: 12.4; 2020: 14.7; 2021: 15.0; 2022 (table): 14.0.\n  - Public sector investment: 2018: 1.5; 2019: 1.9; 2020: 1.3; 2021: 1.0; 2022 (table): 1.2; 2023 (table): 1.1.\n  - Gross national saving: 2018: 16.7; 2019: 18.2; 2020: 19.5; 2021: 15.8; 2022 (table): 15.7; 2023 (table): 14.9.\n- External Sector:\n  - Current account balance (in percent of GDP): 2018: 0.9; 2019: 2.4; 2020: 2.5; 2021: 0.6; 2022 (table): -0.6.\n  - Trade balance (goods) (in percent of GDP): 2018: -10.9; 2019: -10.3; 2020: -8.1; 2021: -12.7; 2022 (table): -14.8; 2023 (table): -13.9.\n  - Exports (in percent of GDP): 2018: 13.2; 2019: 12.9; 2020: 13.0; 2021: 14.4; 2022 (table): 15.4; 2023 (table): 15.4.\n  - Imports (in percent of GDP): 2018: 24.0; 2019: 23.2; 2020: 21.2; 2021: 27.1; 2022 (table): 30.1; 2023 (table): 28.6.\n  - Remittances (part of \"Other (net)\" / listed series): 2018: 13.6; 2019: 14.6; 2020: 17.8; 2021: 16.9.\n- Public Finances (Central Government, in percent of GDP unless otherwise indicated):\n  - Revenues: 2018: 11.3; 2019: 11.2; 2020: 10.7; 2021: 12.3; 2022 (table): 12.0.\n  - Expenditures (current and capital split noted in table): Current (2018 itemization present) and Capital: capital: 2018: 2.6; 2019: 2.7; 2020: 3.0.\n  - Primary balance: 2018: -3.2.\n  - Overall balance (central government): 2018: -1.9; 2019: -2.2; 2020: -1.2; 2021: -2.3; 2022 (table): -2.0.\n  - Central Government Debt: 2018: 26.4; 2019: 31.5; 2020: 30.8; 2021: 30.5.\n- Memorandum items:\n  - GDP (US$ billions): 2018: 73.3; 2019: 77.2; 2020: 77.6; 2021: 86.0; 2022 (table): 91.3; 2023 (table): 96.3.\n\nIMF Press Release No. 22/186 — IMF Executive Board Concludes 2022 Article IV Consultation with Guatemala (June 7, 2022).\n\n---\n\n\n References\n\n- Guatemala and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2022/06/07/pr22186-imf-executive-board-concludes-2022-article-iv-consultation-with-guatemala"
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    "Published: June 7, 2022",
    "The Executive Board concluded the Article IV consultation on June 6, 2022 and considered and endorsed the staff appraisal without a meeting on a lapse-of-time basis.",
    "The Guatemalan economy showed \"remarkable resilience\" during the pandemic and nearly returned GDP to its pre-pandemic projected trend driven by unprecedented policy support, early reopening, and a favorable external environment including strong remittances.",
    "Real GDP growth:",
    "Inflation and external sector in 2021:",
    "Fiscal developments:",
    "Financial sector:",
    "Persistent gaps:",
    "Near-term outlook:",
    "Inflation:",
    "Current account:",
    "Downside risks highlighted:",
    "Overall assessment:",
    "Fiscal policy:",
    "Monetary and exchange rate policy:",
    "Financial supervision and regulatory framework:",
    "Structural reforms to boost investment and inclusion:",
    "Income and Prices (annual percent change, unless otherwise indicated):",
    "Monetary Sector:",
    "Saving and Investment (in percent of GDP, unless otherwise indicated):",
    "External Sector:",
    "Public Finances (Central Government, in percent of GDP unless otherwise indicated):",
    "Memorandum items:",
    "[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)",
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