The economic context of Guatemala

Economic Indicators

Guatemala is the largest economy in Central America in terms of both population and economic activity. The country has seen stable growth, averaging 3.2% from 2014 to 2023, surpassing the Latin American and Caribbean average, thanks to sound fiscal and monetary management. In 2023, economic growth moderated to an estimated 3.5% in 2023, down from 4.2% one year earlier. According to the Central Bank, GDP expanded by an estimated 3.7% in 2024, benefiting from reduced uncertainty, increasing remittances, and higher government expenditure. As per the World Bank, over the forecast period, growth should remain stable, with government consumption and investment expected to play a larger role, while the contribution of private consumption will slow down due to slower remittance growth and higher government spending.

According to the latest estimates from Fitch Ratings, the central government fiscal deficit decreased to 1.0% of GDP in 2024, down from 1.3% in 2023 and below the 2.6% projected in the revised budget passed in August 2024. Fiscal revenues averaged 12.4% of GDP over the past four years, up from 11.2% in 2019, indicating a potential stabilization of gains from tax administration efforts. Expenditures as a share of GDP fell to 13.4% from 13.7% in 2023, as authorities operated with the reduced 2023 budget for most of 2024. The overall general government fiscal balance was 0.0% in 2024, due to the surplus in the social security institute. Domestic borrowing resumed in 2024 after negative net issuance in 2023, and combined with larger-than-usual Eurobond issuance and a lower fiscal deficit, led to increased deposit accumulation. The 2025 budget projects debt issuance to double to USD 3.2 billion, mostly in the local market. The debt-to-GDP ratio is expected to rise slightly to 25.2% in 2025, up from 24.5% in 2024. Interest/revenue is forecasted to remain stable at 8.9%. Fitch estimates the current account surplus moderated to 2.5% of GDP in 2024, down from 3.1% in 2023, due to wider deficits in trade and services balances, partially offset by larger remittance inflows. Inflation has decreased since mid-2023, falling below the official target of 4% +/- 1 percentage point, reaching 1.7% year-on-year in December 2024, driven by lower imported inflation and its secondary effects.

Despite its progress, Guatemala still faces several structural challenges, including low and inefficient social expenditure, a lack of dynamism in the labour market, and low productivity, which is largely attributed to inadequate infrastructure. According to the latest data available by the World Bank, the unemployment rate reached an estimated 2.3% in 2023. However, informality reached 70.3% in 2023, while labour force participation was at 59%, with a significantly lower rate for women at 39.7%. This poses a challenge to efforts aimed at reducing poverty and inequality . Guatemala’s GDP per capita grew by 1.9% from 2014 to 2023, while the average for Latin America and the Caribbean (LAC) was 0.3% during the same period. Nevertheless, poverty based on the upper-middle-income country poverty line (USD $6.85/day per capita, 2017 PPP) remains among the highest in the region, affecting 55.2% of the population, a slight change from 55.4% in 2014. Human capital outcomes have seen minimal improvement during this period, especially for racial minorities. Child malnutrition remains a significant issue, with 44% of children under five suffering from stunting in 2022 (data World Bank).

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. The agricultural sector accounts for 9.8% of GDP and employs 26.7% 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.  According to Central American Business Intelligence, agricultural activity in Guatemala grew 0.5% in 2024. Figures from the FAO show that cereal import needs for the 2024/25 marketing year (July to June) are projected to be around 2.8 million tonnes, which is above the average. The rise in cereal imports over the past decade has mainly been driven by increased demand for wheat for human consumption and yellow maize to support the continued expansion of the poultry industry.

The industry sector accounts for 22.3% of GDP and 21.9% of employment. Main industries in Guatemala include production of coffee; production of textiles, paper industries, petroleum, pharmaceutical products, rubber processing, and tourism. The manufacturing sector as a whole accounts for 14% of the country’s value-added (World Bank). Moreover, the countryhas a small mining industry and extracts copper, zinc, iron and nickel. Furthermore, Guatemala also has strong geothermic and hydroelectric potential.

The service sector represents the largest share of GDP (61.3%) and employs 51.4% 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 due to the pandemic. Still, the tourism sector experienced significant growth in 2023, welcoming over 3 million foreign tourists, 15% more year-on-year, marking a historic milestone for the sector. Following Panama, Guatemala possesses the second-largest banking sector in Central America, characterized by a notable concentration among its top players. Approximately 93% of the total financial system assets are controlled by the sector's 18 banks, underscoring the dominant position of the leading institutions (BNamericas).

 

Breakdown of Economic Activity By Sector	Agriculture	Industry	Services
Employment By Sector (in % of Total Employment)	26.7	21.9	51.4
Value Added (in % of GDP)	9.8	22.3	61.3
Value Added (Annual % Change)	2.2	1.7	3.7

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition

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

 

 

Sources of General Economic Information

Ministries

Ministry of Economy (in Spanish)
Ministry of External Relations (in Spanish)
Ministry of Communications, Infrastructure and Housing (in Spanish)
Chamber of Industry (in Spanish)
Chamber of Commerce (in Spanish)

Statistical Office

National Institute of Statistics (in Spanish)

Central Bank

Central Bank of Guatemala (in Spanish)

Stock Exchange

Guatemala Stock Exchange (in Spanish)

Economic Portals

Deguate (Spanish only)