Economy
Overview:
Guatemala has had a strong traditional, subsistence economy producing a variety
of agriculture products. Coffee became one of the major exports of the country
in the 19th century. The product helped develop the countries infrastructure.
Bananas became an important export in the early 20th century. Manufacturing
became an important industry in the 1940s and whose development was assisted
by the establishment of the Central American Common Market (CACM). Although
Guatemala’s predominantly agricultural economy is subject to the fluctuations
of world commodity prices, since the last decade the country has shown an ability
to maintain healthy levels of inflation and GDP growth. Following a series of
fiscal and tariff reforms, the period from 1991 to 1999 enjoyed an average GDP
growth rate of 4.2 percent. A member of the World Trade Organization and the
Central American Economic Block, Guatemala is part of free-trade agreements
with Panama, Chile and the Dominican Republic. Extensive agricultural resources
have helped this country become the world’s third largest exporter of coffee
and one of the main exporters of bananas and cocoa.
The Guatemala labor force, the largest in Central America, exceeds 2.8 million.
The capital city has well-developed shipping infrastructure but still suffers
from a shortage of technical and managerial personnel. Estimates of the distribution
of purchasing power among the population illustrates the following income brackets:
77 percent of the households earn more than US$5,000 annually, 29 percent earn
more than US$15,000 and eight percent earn more than US$30,000.
Despite the fact that the cost of capital has been slowly increasing for the
last two years, it remains the lowest in Central America. It is the underdevelopment
of Guatemala’s infrastructure that continues to hinder economic development.
Telephone density and access to electricity remain low, but privatization of
the telecommunications sector and the restructuring of the electricity industry
should eventually promote expansion and development. For the 1991-1999 period
Guatemala’s average GDP growth rate of 4.2 percent was the third highest among
all Central American economies, a great improvement from the 1980s meager 0.9
percent average.
Written by CountryWatch.com. The IMF, South American Central America and
the Caribbean 1999, and the 1999 Country Review. For additional sources please
see Appendix B of this review.
Economic Performance:
Guatemala made progress towards restoration of domestic and external equilibria,
which had been threatened by the expansionary fiscal policy applied in the preceding
year and by the worsening terms of trade. This was under the first year of the
new administration. In March 2000, the authorities cut back the public budget
for 2000 by 10 percent. From the second quarter onward, public expenditure increased,
bringing the fiscal deficit to 2.5 percent of GDP. There were major distortions
in the composition of public expenditure, and investment dropped five percent
in real terms. The aim of the monetary policy was a low inflation path. The
economy was estimated to have grown by 3.5 percent according to the Inter-American
Development Bank.
Since assuming office in January 2000, the administration of President Alfonso
Portillo has sought to restore macroeconomic stability and advance the implementation
of the donor-supported Peace Accords. Real GDP growth slowed to three percent
in 2000 (3.5 percent in 1999) reflecting the tight stance of monetary policy,
cuts in public sector investment, and the effect of adverse terms of trade.
Inflation remained at about five percent - the lower end of the Central Bank’s
target range of five to seven percent - as the effect of a deceleration of aggregate
demand and currency stability, noted below, more than offset rising oil prices.
There has been widespread opposition of the measure approved by Congress in
July 2001, which raised the value added tax (VAT) from 10 to 12 percent.
Written by CountryWatch.com. The IMF, South American Central America and
the Caribbean 1999, the 1999 Country Review and International Monetary Fund(www.imf.org).
For additional sources please see Appendix B of this review.
Balance of Payments:
The balance of payments current account showed a deficit of over five percent of GDP. By contrast, there was a substantial inflow of short-term capital, including repatriation of funds by residents, which brought the international reserve balance to US$1.8 billion, an increase of 50 percent.
A fall in coffee prices resulted in a decline in export earnings from this commodity despite a bumper crop. Sugar exports fell in both value and volume. On the other hand, non-traditional exports expanded by 22.4 percent, despite the lack of new investments. Fuel imports increased by close to 50 percent. The external public debt was reduced by two percent compared with 1999.
The rate of the quetzal against the dollar fluctuated sharply at the start of the year 2000. The quetzal is estimated to have depreciated by three percent in real terms in the course of the year, as a result of the wide gap in inflation levels between Guatemala and its trading partners.
The external current account deficit narrowed to 4.5 percent of GDP in 2000 (5.5 percent in 1999) owing to slower economic activity and, the effect with a lag of the large real quetzal depreciation in 1999. The capital account surplus rose to 8.25 percent of GDP on the strength of private capital inflows attracted by high domestic interest rates and renewed confidence in the quetzal, and because of the second installment of receipts from the privatization of the state telecommunication company.
Written by CountryWatch.com. The IMF, South American Central America and the Caribbean 1999 the 1999 Country Review and the International Monetary Fund(www.imf.org).. For additional sources please see Appendix B of this review.
Regional Situation:
With respect to regional economic developments, Guatemala should benefit from the continued efforts to increase trade within the region. However, the slowing down of the U.S. economy could affect its economic performance adversely. (See Appendix B to Chapter III for the current Global Economic Snapshot.)
Guatemala
Macroeconomic Activity
Real GDP Per Capita
|
1996 |
1997 |
1998 |
1999 |
2000 |
|
|
Real GDP |
39,386 |
40,997 |
42,674 |
44,851 |
46,465 |
|
Total Population |
11.358 |
11.670 |
11.988 |
12.311 |
12.640 |
|
Real GDP Per Capita |
3,468 |
3,513 |
3,560 |
3,643 |
3,676 |
|
Sources: |
US CIA World Factbook, IMF World Outlook, |
Global Ranking
|
Gross Domestic Product |
Population |
GDP Per Capita |
||||
|
Country |
Rank |
2000 |
Rank |
2000 |
Rank |
2000 GDP |
|
Guatemala |
63 |
46,465 |
62 |
12.640 |
92 |
3,676 |
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