By Astrid Beltetón Director of the Department of Economics, Rafael Landívar University
In early 2017, the world economic climate was one of uncertainty and contradictory signals regarding the economic performance of various regions and countries. This was associated, on the one hand, to the weak economic growth sustained in 2016 (the lowest since the world economic and financial crisis of 2008-2009) and to significant downward risks associated to the likelihood that global imbalances would continue to grow, that China’s deceleration might be more pronounced and that raw material prices would go down even further. On the other hand, it was associated to lack of political certainty, particularly regarding the policies to be promoted by the United States government administration, specifically in terms of foreign trade, immigration and fiscal policy, and their global implications. Added to this was the elections’ agenda in Europe and intensified geopolitical tensions, including the exit of the United Kingdom from the European Union (Brexit). These factors all represented significant sources of instability for the Guatemalan economy, particularly in view of their linkages with trade, investment, tourism and family remittances.
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The picture has changed since. According to the International Monetary Fund (IMF), economic activity bounced back in Europe, Japan and the United States of America in 2017, as did the emerging economies of Asia, particularly China and India (WEO, October 2017), supported by reactivated investment, international trade and industrial production, in a context of high levels of trust by companies and consumers. As a result of this, global economic growth projections were corrected upward in October, to 3.6% for 2017 and 3.7% for 2018, in both cases, over the rate of 2016 (3.2%). In spite of this, Guatemala’s economy sends mixed signals. Some economic performance indicators reflect dynamic behavior, as does foreign trade and Forex income from family remittances. By contrast, other indicators show positive performance but maintain a deceleration trend, such as private sector credit rates and public spending.