Economic and Political Overview

flag Guatemala Guatemala: Economic and Political Overview

In this page: Economic Indicators | Foreign Trade in Figures | Sources of General Economic Information | Political Outline | COVID-19 Country Response

 

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Guatemala GDP grew by 5.5% in 2021, mainly driven by net exports and remittances from the U.S., which were powered both by the country's economic growth and falling unemployment among the Guatemalan population in the United States. Remittances represent around 30% of household income, and their boost should continue to support household consumption, which accounts for 85% of GDP. Still, according to the IMF, GDP growth is expected to slightly decrease to 4.5% in 2022 and 3.8% in 2023. Guatemala's economy receives strong financial support from the U.S. and multilateral lenders; is bolstered by free trade agreements with the U.S. and the E.U.; enjoys a privileged proximity to Mexico and the U.S.; and is recognised as a country with high potential in multiple sectors (tourism, agriculture, mining, hydroelectric and geothermal energy).

Guatemala's public deficit closed at -2.2% of GDP in 2021 and is projected to stay stable in 2022 (-2.6%) and 2023 (-2.4%). Public debt reached 32.1% of GDP in 2021 and will slightly increase in 2021 (31.9%) and 2022 (32.3%). Inflation increased to 4.8% in 2021 and should remain stable at 4.5% in 2022 and 4.3% in 2023. The return of inflation rates to the middle of the government's target window should continue to support consumption in 2022, allowing the central bank to maintain its expansionary policy and facilitating the growth of credit to the private sector, in keeping with the current administration's pro-business agenda. Nevertheless, Guatemala's challenges are numerous: social and political instability, poor infrastructure, corruption, vulnerability to external factors (natural disasters and commodity prices), reliance on low value-added industries and remittances, low fiscal revenues, and a range of social issues that include rural poverty, inequalities, underemployment, informality, and ethnic divisions. The absence of a redistributive fiscal policy also hinders attempts to reduce inequality. In order to face the current crisis related to the COVID-19, the central bank is maintaining a low director rate, but investors are still quite careful. Public demand should increase consequently due to the government plan to support the economy. The major focus of this plan is the infrastructure development (roads, ports, etc) representing 60% of the planned investment.

The unemployment rate in Guatemala was 3.5% in 2020, nearly double the rate of 2019, mainly due to the impacts of the pandemic - particularly in the construction sector, services, and transport. In addition, the country's informal sector grew 60% according to Guatemala's Labor and Social Security Minister. Furthermore, more than half of the population live below the poverty line. The country also has one of the highest rates of malnutrition in the world, one quarter of its adults are illiterate, there is a high level of income inequality, and there is a high rate of organised crime and drug trafficking related violence.

 
Main Indicators 20202021 (e)2022 (e)2023 (e)2024 (e)
GDP (billions USD) 77.6385.9791.3295.60102.88
GDP (Constant Prices, Annual % Change) -1.88.03.43.23.8
GDP per Capita (USD) 44455
General Government Balance (in % of GDP) -4.2-1.9-2.5-2.4-2.2
General Government Gross Debt (in % of GDP) 31.530.830.130.029.7
Inflation Rate (%) 3.24.36.45.64.3
Current Account (billions USD) 3.832.181.030.720.71
Current Account (in % of GDP) 4.92.51.10.80.7

Source: IMF – World Economic Outlook Database , Latest available data

Note: (e) Estimated Data

Main Sectors of Industry

Guatemala doesn't have many natural resources, but the country still has some reserves of petroleum, land for agriculture, and some small mineral deposits. Main industries in Guatemala include production of coffee; production of textiles, paper industries, petroleum, pharmaceutical products, and rubber processing; and tourism. The country - which has a small mining industry - extracts copper, zinc, iron and nickel - also has strong geothermic and hydroelectric potential. The agricultural sector accounts for 10.2% of GDP and employs 31.3% of the active population. Besides coffee, Guatemalan agriculture involves sugar, bananas, cotton, rubber, cardamom and a variety of precious woods and fruits. In recent years, farm communities - mostly indigenous - have been displaced by land inequality, low plantation wages, and due to food insecurity in the palm oil industry. Despite the pandemic, the agricultural sector grew in 2021, as it benefit from a favourable base effect following poor harvests in 2020, which were mainly an effect of the bad weather experienced throughout the country that year.

The industry sector accounts for 22% of GDP and 18.7% of employment. More than half of the economic activity in Guatemala occurs within four sectors: manufacturing, commerce, private service, and agriculture. The industry is primarily focused on producing the following products: textiles, furniture, petroleum, sugar, processed foods, and chemicals. Although manufacturing was the most affected by the pandemic, mainly due to the decrease of American demand, the industry sector as a whole showed a rebound in 2021. The construction sector, in particular, remained extremely busy due to heightened public investment in infrastructure and increased investment in the sector as a whole.

The service sector represents the largest share of GDP (61.8%) and employs 49.9% of the population. Key sectors include tourism, health care, customer service, financial services, banking institutions, hospitality, communications, and retail. Tourism is one of the country’s most important sectors, bringing in billions of dollars every year. However, the sector suffered enormously in the last couple of years due to the pandemic. Still, the tourism sector started to experience a slow recovery in 2021, as travel restrictions were lifted in European countries and the United States, a path which it is set to continue on in the coming years.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 31.3 18.7 50.0
Value Added (in % of GDP) 10.2 22.1 61.9
Value Added (Annual % Change) 2.9 -1.2 -1.9

Source: World Bank - Latest available data.

 

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Monetary Indicators 20162017201820192020
Guatemala Quetzal (GTQ) - Average Annual Exchange Rate For 1 MUR 0.210.210.220.220.20

Source: World Bank - Latest available data.

 
 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:
64/100
World Rank:
75
Regional Rank:
15

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 
 

Country Risk

See the country risk analysis provided by Coface.

 

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Foreign Trade in Figures

Regional integration is a priority of Guatemalan foreign policy, and trade represents 41.8% of GDP. However, poverty, violence, and political uncertainty remain the greatest obstacles to increased trade. Guatemala is the 92nd largest exporter and the 75th largest importer in the world. The country mainly exports nutmeg (9.7%), bananas (8.2%), coffee (5.6%), cane or beet sugar (5%), and palm oil (4.1%); while imports include petroleum oils (9%), motor vehicles (5.3%), electrical apparatus for radio-telephony (3.9%),  andmedicaments (3.1%).

Guatemala's main trade partners are the United States, El Salvador, China, Mexico, Honduras, Nicaragua, and Costa Rica. Guatemala is one of five countries in the Central American Common Market (CACM) along with Costa Rica, El Salvador, Honduras, and Nicaragua. The country is also a member of Central American Integration System (SICA). The European Union supports this integration process, which was one of the conditions of an agreement between the two regions. Guatemala is, after Nicaragua, the second largest recipient of European cooperation aid in Central America and benefits from the Generalised Scheme of Preferences.

In 2020, exports of goods reached USD 11.5 billion, while imports stood at USD 18.2 billion. As for services, Guatemala imported USD 2.7 billion, while exported USD 2.5 billion. Although overall imports registered a 4.6% decline from the previous year, exports also fell by 4.4% compared to the previous year. As a result, Guatemala had trade deficit of USD 5.9 billion concerning the trade of goods, which is slightly lower than the overall trade deficit including services, which amounted to USD 6.1 billion.

 
Foreign Trade Indicators 20162017201820192020
Imports of Goods (million USD) 16,99718,38819,69919,88218,205
Exports of Goods (million USD) 10,46510,99010,76911,17511,521
Imports of Services (million USD) 2,9963,2043,4703,5512,752
Exports of Services (million USD) 2,6942,7723,6053,6012,527
Imports of Goods and Services (Annual % Change) 0.92.83.94.9-4.6
Exports of Goods and Services (Annual % Change) 2.41.5-0.30.1-4.4
Imports of Goods and Services (in % of GDP) 27.627.628.927.924.9
Exports of Goods and Services (in % of GDP) 18.818.518.217.616.9
Trade Balance (million USD) -6,077-6,791-7,985-7,967-5,927
Trade Balance (Including Service) (million USD) -5,855-6,500-7,819-7,918-6,177
Foreign Trade (in % of GDP) 46.446.147.145.641.8

Source: WTO – World Trade Organisation ; World Bank , Latest Available Data

 

Main Partner Countries

Main Customers
(% of Exports)
2021
United States 31.8%
El Salvador 12.6%
Honduras 10.2%
Nicaragua 6.1%
Mexico 4.3%
See More Countries 34.9%
Main Suppliers
(% of Imports)
2021
United States 32.8%
China 15.6%
Mexico 10.4%
El Salvador 4.5%
Costa Rica 2.9%
See More Countries 33.8%

Source: Comtrade, Latest Available Data

 
 

Main Products

13.7 bn USD of products exported in 2021
Bananas, incl. plantains, fresh or driedBananas, incl. plantains, fresh or dried 6.8%
Coffee, whether or not roasted or decaffeinated;...Coffee, whether or not roasted or decaffeinated; coffee husks and skins; coffee substitutes containing coffee in any proportion 6.8%
Palm oil and its fractions, whether or not refined...Palm oil and its fractions, whether or not refined (excl. chemically modified) 5.1%
Nutmeg, mace and cardamomsNutmeg, mace and cardamoms 4.8%
Cane or beet sugar and chemically pure sucrose, in...Cane or beet sugar and chemically pure sucrose, in solid form 3.7%
See More Products 72.8%
26.6 bn USD of products imported in 2021
Petroleum oils and oils obtained from bituminous...Petroleum oils and oils obtained from bituminous minerals (excl. crude); preparations containing >= 70% by weight of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations, n.e.s.; waste oils containing mainly petroleum or bituminous minerals 11.6%
Telephone sets, incl. telephones for cellular...Telephone sets, incl. telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voice, images or other data, incl. apparatus for communication in a wired or wireless network [such as a local or wide area network]; parts thereof (excl. than transmission or reception apparatus of heading 8443, 8525, 8527 or 8528) 3.1%
Medicaments consisting of mixed or unmixed...Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses "incl. those in the form of transdermal administration" or in forms or packings for retail sale (excl. goods of heading 3002, 3005 or 3006) 2.5%
Motor cars and other motor vehicles principally...Motor cars and other motor vehicles principally designed for the transport of persons, incl. station wagons and racing cars (excl. motor vehicles of heading 8702) 2.5%
Motor vehicles for the transport of goods, incl....Motor vehicles for the transport of goods, incl. chassis with engine and cab 2.2%
See More Products 78.0%

Source: Comtrade, Latest Available Data

 
 

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Main Services

Source: United Nations Statistics Division, Latest Available Data

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Political Outline

Current Political Leaders
President: Alejandro Giammattei (since 14 January 2020)
Vice President: Guillermo Castillo (since 14 January 2020)
Next Election Dates
Presidential and parliamentary: June 2023
Main Political Parties
Guatemala has a multi-party system, though several larger parties typically dominate politics. The main political parties include:

- National Unity of Hope Party (UNE): centre-left, nationalist
- Vamos: right-wing, conservative, liberal
- Valor: right-wing, conservative, populist
- Commitment, Renewal and Order (CREO): centre, nationalist, conservative
- Encounter For Guatemala (EG): centre-left, ethnic interest of the indigenous, social-democrat
- Guetemalan National Revolutionary Unity (URNG): left-wing to far-left, socialist, populist
- National Convergence Front (FCN): right wing, nationalist, conservative
- Vision With Values (ViVa): centre-right
- National Advancement Party (PAN): right-wing, conservative

Type of State
Republic based on a constitutional democracy.
Executive Power
The President is both the Chief of State and Head of Government, and is elected by popular vote for a term of four years. He/she holds the executive powers, which include implementing the law and running the day-to-day affairs. The Council of Ministers is appointed by the President.
Legislative Power
The Guatemalan legislative power is unicameral. Parliament, known as the Congress of the Republic, has 160 members who are elected by popular vote for a term of four years. The country's constitution provides for the separation of executive, legislative, and judiciary powers. Even though the president cannot dissolve parliament, he/she has the power to veto acts of parliament which, in turn, can be overridden by a legislative supermajority.
 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
116/180
 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Partly Free
Political Freedom:
4/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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COVID-19 Country Response

COVID-19 epidemic evolution
To find out about the latest status of the COVID19 pandemic evolution and the most up-to-date statistics on the COVID19 disease in Guatemala, please visit the Ministry of Public Health (MSPAS) website with the official data. Official information on the progress of the epidemic in Guatemala is consolidated by the Social Security Institute (IGSS). The agency provides a daily epidemiological update, which includes key national figures.
For the international outlook you can consult the latest situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.
Sanitary measures
To find out about the latest public health situation in Guatemala and the current sanitary measures in vigour, please consult the Guatemalan Ministry of Public Health (MSPAS), including the up-to-date information on the containment measures put in place and public health recommendations.
Travel restrictions
The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.

The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.
Import & export restrictions
For the information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the portal of the Superintendence of Tax Administration (SAT).
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to Guatemala on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
For the information on the economic recovery scheme put in place by the Guatemalan government to address the impact of the COVID19 pandemic on the Guatemalan economy, please visit the Guatemalan government platform. The information on the Guatemalan economic emergency plan is available here.

For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Guatemalan government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Guatemala in the IMF’s Policy Tracker platform.
Support plan for businesses
For the information on the local business support scheme established by the Guatemalan government to help small and medium-sized companies to deal with the economic impacts of the COVID19 epidemic on their activity, please consult the portal of the Guatemalan Ministry of Economy (MINECO).

For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the World Bank's Map of SME-Support Measures in Response to COVID-19.

Support plan for exporters
To find out about the support plan for exporters put in place by the Guatemalan government, please consult the Guatemalan Exporters Association (AGEXPORT).
 

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Latest Update: November 2022