As of June, Central American economies began to show signs of incipient recovery and as of August, Guatemala, Nicaragua and Costa Rica registered the smallest drops in their levels of economic activity.
Since March of this year, the region has faced a severe economic crisis generated by the outbreak of covid-19. The strict quarantines decreed, the closure of borders and commercial establishments, ended up damaging the dynamism of productive activities.
Agriculture, Financial and Insurance Activities, and Real Estate Activities, are the sectors that in Guatemala and in the context of the economic reopening, have increased their growth forecasts for 2020.
In June, when mobility restrictions were severe in the country due to the outbreak of covid-19, the Bank of Guatemala (Banguat) predicted that by the end of the year, Agriculture would grow by 1.1%, Financial and insurance activities by 2% and Real estate activities by 2.8%.
After the IMAE in Guatemala registered a -11% year-on-year variation in May of this year, during June and July the production contractions were lower, reporting falls of 7% and 5%, in that order.
The Bank of Guatemala reported that in the current economic crisis that emerged due to the spread of covid-19, the activities that have most boosted the drop in production are trade, tourism and transportation.
Variations indicating a certain improvement in the world economy, the reopening of different markets and the recovery of exports are some of the factors that could influence Guatemala's economic activity to decrease less than expected in 2020.
After the industrial activity registered in May one of the lowest levels of the last years, it is expected that the sector will close 2020 in negative variations, but more moderate than those reported in the first half of the year.
The Index of Economic Activity of the Chamber of Industry of Guatemala, which is calculated by Central American Business Intelligence (Cabi), states that during May and in the context of the economic crisis resulting from the outbreak of covid-19, fell by about 10% when compared to the same period in 2019.
Speeding up the repayment of the tax credit, repealing the Solidarity Tax, approving the Leasing Law, reforming the Banking Law and the Free Zone Law, is part of what Guatemalan businessmen are proposing to reactivate the economy in this context of crisis.
At present, Guatemala is immersed in a severe economic crisis, which was generated by the restrictions to productive activities that were decreed due to the outbreak of covid-19.
After in May this year and in the context of the economic crisis, the IMAE in Guatemala registered a -12% year-on-year variation, during June 2020 the contraction of production was lower, reporting a 9% fall compared to the same month in 2019.
In the current economic crisis resulting from the spread of covid-19, the activities that have most boosted the drop in production are trade, tourism and transport, reported the Bank of Guatemala.
As of July 27, the different production activities can be carried out, as long as the restrictions of the Health Alert System for the covid-19 epidemic are met, which will have a municipal, departmental or regional scope.
After more than four months of restrictions on the mobility of people and some economic activities, President Alejandro Giammattei explained on the night of July 26 that the country will enter a phase of reopening the economy.
The Government will decide whether or not to remove the restrictions imposed by the spread of covid-19, based on the number of cases per 100,000 inhabitants reported by municipality, department or region.
On July 12 on a national channel, President Alejandro Giammattei announced that as of July 27 a health alert system will be established to de-escalate and escalate the restrictions.
In order to de-escalate the confinement and reactivate productive activities, the Guatemalan authorities plan to begin in the regions where the covid-19 curve starts to fall, without having to wait for this situation to arise throughout the country.
Since mid-March, Guatemala has been under house quarantine, due to the covid-19 outbreak that so far affects all departments of the country.
After the Economic Activity Confidence Index reported a 19% drop in March 2020, in April the situation worsened with a -43% year-on-year variation, a drop that agrees with the advance of the health crisis in the country.
In April 2020, the level of the Economic Activity Confidence Index stood at 32.64 points, 43.25% lower than that recorded in March 2020 (57.52 points) and fell by 26.83% compared to April 2019 (44.61 points), reported the Bank of Guatemala.
Guatemalan businessmen believe that in order to reactivate economic activity in the country, it is necessary to restrict the number of people in public spaces and increase the number of tests performed on those who have signs of carrying the virus.
During January, IMAE registered a year-on-year variation of 3.6%, up from 3.4% at the end of 2019.
The growth rate of the Monthly Index of Economic Activity (IMAE) reported in the first month of 2020 is also higher than that recorded in January 2019, when the year-on-year change was 3.2%.
The report of the Bank of Guatemala states that "... The behavior described, was influenced by the economic activities of Commerce and vehicle repair; manufacturing industries; Real Estate activities; Agriculture, cattle, forestry and fishing and Financial and insurance activities.
In February 2020, the Index of Confidence in Economic Activity in Guatemala reported a 64% growth compared to the same month last year, reinforcing the upward trend that has been registered since July 2019.
Businessmen forecast an inflationary rhythm of 3.25% for February, 3.36% for March and 3.38% for April 2020. As to December 2020 and 2021, the Panel forecasts an inflationary rhythm of 4.16% and 4.20%, in that order.
At the end of 2019, economic activity in Guatemala grew 3%, behavior that was explained in part by the performance of the commercial and construction sectors.
From the Bank of Guatemala report:
During December 2019 the economic activity measured by the IMAE estimate, registered a 3.1% growth rate with respect to December 2018 (2.2%).
This behavior was explained by the positive result mainly experienced by the economic activities of Commerce and vehicle repair; Construction; Real estate activities; Financial and insurance activities; and Agriculture, livestock, forestry and fishing, which had a greater influence on the growth rate of the total IMAE.