IMF Executive Board Concludes 2012 Article IV Consultation with Guatemala

Public Information Notice (PIN) No. 12/47
May 8, 2012

Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.

On April 30, 2012, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Guatemala.1


Macroeconomic developments in Guatemala since 2010 have been broadly positive. Real Gross Domestic Product (GDP) grew by 2.8 percent in 2010 and 3.8 percent in 2011, underpinned by buoyant exports and domestic demand. High world oil and food prices pushed up inflation to 7.6 percent in mid-2011 (from 5.4 percent at end-2010), but by early 2012 it had fallen within the central bank’s target range of 3.5–5.5 percent. While the external current account deficit widened in 2011, the surplus in the capital account was larger, partly due to banks’ increased access to foreign credit lines. As a result, the overall balance of payments in 2011 recorded a surplus and net international reserves remained at comfortable levels.

Policies were tightened in 2011. The deficit of the central government declined to 2.8 percent of GDP, down from 3.3 percent in 2010, helping maintain public debt broadly stable at 24.2 percent of GDP. To limit second-round effects from higher commodity prices, the monetary policy rate was increased by 100 basis points to 5.5 percent. The currency appreciated moderately in nominal terms from early 2010 to April 2011 and has been broadly stable since then, amid limited central bank intervention under the rules-based framework.

The financial sector has remained stable, with adequate levels of liquidity and capitalization. Private sector credit growth picked up and deposits in the banking system grew steadily. The relative size of the offshore sector continued to decline and financial dollarization has remained broadly stable. Full provisioning of non-performing loans was achieved in mid-2011.

The economic outlook is generally positive. Real GDP growth is expected to moderate to 3.1 percent in 2012 driven by the global slowdown, and increase to 3.5 percent in the medium term. Inflation is projected to decline to 5 percent in 2012 and fall gradually thereafter to 4 percent. International reserves are expected to remain at comfortable levels. However, the outlook is subject to downside risks related to the uncertain global environment, particularly regarding slower-than-expected growth in the United States and higher oil prices. Against this backdrop, the authorities are reducing the central government deficit in 2012 to 2.4 percent of GDP, maintaining a neutral bias for monetary policy, and preserving exchange rate flexibility.

Executive Board Assessment

Executive Directors welcomed Guatemala’s economic recovery and the favorable outlook, considering that the policy stance for 2012 is broadly appropriate. Given the downside risks posed by the uncertain global environment, it will be important to maintain prudent macroeconomic policies and increase the readiness for timely policy responses.

Directors encouraged the authorities to improve public expenditure management. They stressed the urgency of producing a reliable estimate of the stock of domestic payments arrears and developing a plan to eliminate them. Directors indicated that the planned amendments to the organic budget law provide a key opportunity to strengthen the fiscal framework, and welcomed the submission to congress of draft laws aimed at improving the transparency of expenditures.

Directors welcomed the recent passage of revenue-enhancing reforms. They underscored the importance of further deepening revenue mobilization, including reducing tax exemptions, to help ensure medium-term fiscal sustainability and allow higher levels of government spending on social programs, infrastructure, and security. Directors called for efforts to streamline revenue earmarks to enhance fiscal flexibility and reorient expenditures to priority areas.

Directors encouraged the authorities to raise the effectiveness of monetary policy to anchor low inflation, including by taking further steps to increase exchange rate flexibility. In this context, they underscored the importance of greater operational autonomy for the central bank.

Directors noted that strengthening the financial sector remains a priority. Securing congressional approval of the amendments to the banking law, submitted in 2009, would help lower risks from offshore operations and connected lending, improve resolution procedures, and strengthen the instruments and size of the banking sector safety net.

Directors emphasized the need for further structural reforms to boost growth potential and reduce poverty. In addition to fiscal reforms to mobilize revenues and improve public expenditure management, Directors encouraged the authorities to implement the competitiveness agenda, including improving the business environment.

Table 1. Guatemala: Selected Economic and Social Indicators  
I. Social and Demographic Indicators

Population 2010 (millions)


Gini index (2006)


wPercentage of indigenous population (2006)


Life expectancy at birth (2009)


Population below the poverty line (Percent, 2006)


Adult illiteracy rate (2009)


Rank in UNDP development index (2011; of 187)


GDP per capita (US$, 2010)

II. Economic Indicators


      Est.   Proj.


2008 2009 2010 2011   2012


(Annual percent change)

Income and prices







Real GDP

3.3 0.5 2.8 3.8



Consumer prices (end of period)

9.4 -0.3 5.4 6.2










Monetary sector








7.6 10.0 11.3 10.7   9.8

Credit to the private sector

11.0 1.1 5.7 14.1   11.2


(In percent of GDP, unless otherwise indicated)

Savings and investment







Gross domestic investment

16.4 12.9 14.7 15.8   16.6

Gross national saving

12.1 12.9 13.1 12.9   13.3

External saving

4.3 0.0 1.5 2.8   3.3

External sector





Current account balance

-4.3 0.0 -1.5 -2.8



Trade balance (goods)

-14.2 -8.9 -10.4 -10.6




20.0 19.4 20.7 22.4




-34.3 -28.2 -31.1 -33.0



Of which: oil & lubricants

-6.8 -5.5 -5.7 -6.6



Other (net)

10.0 8.9 8.8 7.7



Of which: remittances

11.3 10.5 10.1 9.4



Capital and financial account

3.7 0.5 3.9 4.4   4.2

Errors and omissions

1.4 0.7 -0.7 -1.1   0.0

Overall balance

0.9 1.3 1.6 0.4   0.9

Net international reserves


(Stock in months of next-year NFGS imports)

4.2 3.8 3.6 3.5   3.6

(Stock over short-term debt on residual maturity)

1.6 2.0 2.0 1.8   1.7

Public finances







Central government








12.0 11.1 11.3 11.8   11.8


13.6 14.2 14.6 14.7   14.1


9.9 10.7 11.0 11.0   11.0


3.7 3.5 3.6 3.7   3.1

Primary balance

-0.3 -1.7 -1.8 -1.3   -0.7

Overall balance

-1.6 -3.1 -3.3 -2.8   -2.4

Financing of the central government balance

1.6 3.1 3.3 2.8



Net external financing

0.3 1.3 1.5 0.1



Net domestic financing

1.3 1.8 1.8 2.7



Of which: use of government deposits

0.8 0.4 -0.1 0.5



Nonfinancial public sector debt

20.1 22.9 24.2 24.2




11.3 13.0 13.1 11.9




8.9 9.9 11.1 12.3



Memorandum items:







GDP (US$ billions)

39.1 37.7 41.2 46.9



Sources: Bank of Guatemala; Ministry of Finance; and IMF staff estimates and projections.



1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here:


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