{
  "title": "Guatemala: Staff Report for the 2014 Article IV Consultation",
  "publication": "IMF Staff Country Reports, September 18, 2014",
  "sourceUrl": "https://www.imf.org/en/publications/cr/issues/2016/12/31/guatemala-staff-report-for-the-2014-article-iv-consultation-41930",
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  "summary": "KEY ISSUES Context. Guatemala’s economy has performed solidly since the 2008–09 crisis. Output has converged to potential, inflation is under control, and macroeconomic policies remain prudent.",
  "sections": [
    {
      "heading": "Key issues and context",
      "content": "- Guatemala’s economy has performed solidly since the 2008–09 crisis.\n- Output has converged to potential, inflation is under control, and macroeconomic policies remain prudent.\n- Risks to the outlook are tilted downwards, while buffers are modest and space for counter-cyclical policies is thin.\n- Long-term inclusive growth is constrained by low investment in physical and human capital, institutional weaknesses, and lack of security."
    },
    {
      "heading": "Near-term macroeconomic policy assessment",
      "content": "- Near-term policies are broadly appropriate.\n- With the output gap closed, the broadly neutral fiscal stance is adequate.\n- The monetary stance is slightly expansionary, but inflation is at the bottom of the target range.\n- Recommendation: The authorities should stand ready to tighten monetary policy if inflationary pressures re-emerge."
    },
    {
      "heading": "Fiscal sustainability and public finances",
      "content": "- Though the debt-to- GDP ratio remains moderate, the ability to implement counter-cyclical fiscal policies is limited, not least by Guatemala’s high government debt-to-revenue ratio.\n- Debt stabilization requires moderate tightening of the budgetary stance over the medium term.\n- Emphasis should be on revenue mobilization, given the overall low level of spending.\n- Consolidating gains from the 2012 tax reform, which has so far proved disappointing, will be critical."
    },
    {
      "heading": "Monetary and exchange rate framework",
      "content": "- Efforts to upgrade the monetary and exchange policy framework should continue.\n- Anchoring low and stable inflation will require measures to bolster monetary policy transmission, including by expanding exchange rate flexibility.\n- Expected benefits from expanded exchange rate flexibility:\n  - Provide an additional shock absorber.\n  - Reduce incentives for dollarization.\n  - Establish the inflation target as the undisputed primary objective of the central bank."
    },
    {
      "heading": "Financial system and regulation",
      "content": "- The 2014 FSAP update found that Guatemala has made significant progress in financial regulation and that the banking system appears to be generally sound.\n- Remaining priorities:\n  - Improve consolidated supervision.\n  - Improve the regulation of off-shore banks.\n  - Undertake a phased move to Basel III standards."
    },
    {
      "heading": "Structural reforms for inclusive growth",
      "content": "- Structural reforms are vital to achieving long-term inclusive growth.\n- Paving the way towards high, inclusive growth will depend upon raising the low tax-to-GDP ratio to support priority public spending, thereby addressing critical social and developmental needs.\n\nSource: Guatemala: Staff Report for the 2014 Article IV Consultation (IMF staff summary as presented on the publication landing page).\n\n---\n\n Content in this bundle\n\n- 1. Guatemala: External Stability Assessment\n  - 1. Guatemala: External Stability Assessment (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 1. Guatemala: External Stability Assessment (PDF){rel=\"external\" type=\"application/pdf\"}"
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    "Published: September 18, 2014",
    "Series: IMF Staff Country Reports",
    "DOI: https://doi.org/10.5089/9781498338127.002",
    "Guatemala’s economy has performed solidly since the 2008–09 crisis.",
    "Output has converged to potential, inflation is under control, and macroeconomic policies remain prudent.",
    "Risks to the outlook are tilted downwards, while buffers are modest and space for counter-cyclical policies is thin.",
    "Long-term inclusive growth is constrained by low investment in physical and human capital, institutional weaknesses, and lack of security.",
    "Near-term policies are broadly appropriate.",
    "With the output gap closed, the broadly neutral fiscal stance is adequate.",
    "The monetary stance is slightly expansionary, but inflation is at the bottom of the target range.",
    "Recommendation: The authorities should stand ready to tighten monetary policy if inflationary pressures re-emerge.",
    "Though the debt-to- GDP ratio remains moderate, the ability to implement counter-cyclical fiscal policies is limited, not least by Guatemala’s high government debt-to-revenue ratio.",
    "Debt stabilization requires moderate tightening of the budgetary stance over the medium term.",
    "Emphasis should be on revenue mobilization, given the overall low level of spending.",
    "Consolidating gains from the 2012 tax reform, which has so far proved disappointing, will be critical.",
    "Efforts to upgrade the monetary and exchange policy framework should continue.",
    "Anchoring low and stable inflation will require measures to bolster monetary policy transmission, including by expanding exchange rate flexibility.",
    "Expected benefits from expanded exchange rate flexibility:",
    "The 2014 FSAP update found that Guatemala has made significant progress in financial regulation and that the banking system appears to be generally sound.",
    "Remaining priorities:",
    "Structural reforms are vital to achieving long-term inclusive growth.",
    "Paving the way towards high, inclusive growth will depend upon raising the low tax-to-GDP ratio to support priority public spending, thereby addressing critical social and developmental needs.",
    "**1. Guatemala: External Stability Assessment**"
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