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Country Economic Forecasts > Guatemala

  • September 2014
  • -
  • Oxford Economics
  • -
  • 4 pages

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We maintain our forecast for GDP growth of 3.4% for 2014. The expansion is supported by solid private consumption, underpinned by remittances from the US growing by nearly 10%. And this positive trend should persist as the US economy gains speed. Although headline inflation is now picking up, core inflation is still subdued - which has provided scope for interest rate cuts this year. In September the rating agency Moody's maintained its Ba1 rating of Guatemala with a stable outlook, mentioning the recent improvement in the budget deficit. And compared to other countries in the region, Guatemala's 'twin' current account and fiscal deficits are under control. However, the modest budget deficit masks the fact that the country's tax base is exceedingly small, less than 12% of GDP. So, unless this is changed, a cautious fiscal policy implies there is little or no scope for the government to spend more on improving the country's physical and social infrastructure - and this is needed to boost long-run growth prospects.

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