Although expectations for the end of 2021 are good for the Guatemalan economy, there is uncertainty regarding what will happen in the second part of the year, as the vaccination process is progressing slowly.
According to World Bank forecasts published in June 2021, it is expected that at the end of the year, Guatemala's Gross Domestic Product will grow 3.6% year-on-year. See report "Global Economic Prospects".
For the international organization, during 2020, Guatemala's economy showed resilience, since in the context of the crisis caused by the Covid-19 outbreak, the GDP contracted only 1.5%.
According to the International Monetary Fund, in a context of favorable specialization of production and exports, resilience of remittances, and unprecedented support from monetary and fiscal policies, the drop in Guatemalan production was minimal compared to that reported in other Central American countries.
Fifteen months after the beginning of the health and economic crisis, Guatemala, Honduras and Nicaragua are the economies in the region with the highest inflation rates, a behavior that was influenced by increases in fuel and transportation costs.
In the second quarter of 2020, a period in which the countries of the region were going through a severe economic crisis caused by the Covid-19 outbreak, inflation levels were low and in some economies negative variations were reported.
Following the visit of US Vice President Kamala Harris to Guatemala, the business sector assures that in order to reduce illegal migration from Central America to the US, it is necessary to create a favorable and comfortable environment for local and foreign investment in the countries of the region.
As part of Harris' visit to Guatemala, Agexport prepared a document with proposals that reflect the experience it has accumulated over many years, incorporating Guatemalans and small rural businesses into export chains, generating income that allows them to remain in their territories.
For Fitch, the delay in vaccination campaigns constitutes a latent risk of a prolonged pandemic, which would delay the recovery of the region's economies and would cause negative pressures on the risk ratings to be issued in the coming months.
Fitch Ratings issued a bulletin for Mexico, Central America and the Caribbean on May 25, in which it warned that given the deep economic contractions in the region and the moderate recovery outlook, there are threats of negative rating pressures.
In March 2021, the Monthly Index of Economic Activity reported a 6.9% increase over the level recorded in the same month of 2020.
The Guatemalan economy continues to show positive signs, as after facing a crisis during 2020 due to the covid-19 outbreak, economic activity has recovered rapidly in the last months of last year and in the first quarter of 2021.
According to the IMF, the local economy is well positioned to support the recovery and overcome the deterioration of social indicators, which worsened due to the pandemic caused by the Covid-19 outbreak.
Strong remittances, pandemic-resilient productive specialization, and unprecedented economic policy support limited economic contraction in 2020, while the outlook for 2021 benefits from additional U.S. fiscal stimulus, the International Monetary Fund (IMF) reported.
Reducing costs and barriers to foreign trade in Central American economies is key for the region to overcome the economic recession caused by the outbreak of Covid-19.
A report prepared by the World Bank explains that boosting economic activity and employing a higher percentage of the labor force are objectives that can be achieved through reforms that strengthen the private sector and attract investment.
Arguing that the measures applied by the government directly harm employees and owners of restaurants and bars, a group of businessmen in Guatemala filed a legal action in the Constitutional Court.
Restrictions to productive activity have already been applied for days, since with the purpose of promoting actions aimed at interrupting the epidemiological chain of the Covid-19 disease, on April 17 Ministerial Agreement 87-2021 was published in the Diario de Centroamerica, a regulatory framework that requires a 25% reduction in the capacity of shopping centers, shopping malls, convenience stores and restaurants.
As a result of the restrictions imposed by the Guatemalan Government, local businessmen estimate that sales in the commercial sector last weekend fell by up to 50% and the number of customers in restaurants and shopping centers decreased considerably.
In order to promote actions aimed at interrupting the epidemiological chain of the Covid-19 disease, Ministerial Agreement 87-2021 was published on April 17 in the Diario de Centroamerica, a regulatory framework that requires a 25% reduction in the capacity of shopping malls, commercial centers, convenience stores and restaurants.
The World Bank predicts that by the end of this year Panama and the Dominican Republic will be the economies of the region that will grow the most, and the countries that will report the lowest increases in their production will be Costa Rica and Nicaragua.
After the region's economies were considerably affected in 2020 by the sanitary crisis generated by the Covid-19 outbreak, the outlook of international organizations for 2021 is encouraging.
As a result of the economic crisis generated by the pandemic, it is estimated that four out of every five Central American companies were forced to increase their debts in order to sustain their operations.
According to the 2021 Regional Survey on economic reactivation prepared by the Federation of Chambers of Commerce of the Central American Isthmus (Fecamco), the resources obtained through indebtedness, served the companies to pay payroll, face rents and support operations.
Twelve months after Central America began a health and economic crisis triggered by the covid-19 outbreak, Guatemala was the fastest recovering economy and Panamanian economic activity is the slowest to return to pre-pandemic levels.
In March 2020, the first cases of covid-19 began to be detected in the countries of the region. The highly contagious disease, which at that time had already claimed the lives of thousands of people around the world, forced Central American governments to establish mobility restrictions.
During January of this year, the Monthly Index of Economic Activity reported a 3.2% increase compared to the level reported in the same month of 2020.
The Guatemalan economy continues to show positive signs, since after facing a crisis during 2020 due to the covid-19 outbreak, economic activity has recovered quickly in recent months.
Regarding what is expected economically for 2021, in Nicaragua, El Salvador, Panama and Honduras there is more optimism among consumers, while in Guatemala and Costa Rica the percentage of people who believe that the situation will improve this year is lower.
According to the survey conducted by Kantar to measure the perception of households in Central America, at regional level 12% of consumers consulted believe that the economic situation in their country will improve during 2021, 23% expect it to be the same and 65% predict that it will be worse.
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