Between March 23 and 24 the price of the Quetzal vs. Dollar rose from Q7.67 to Q7.75, which is attributed to the expectations of a possible economic slowdown, due to the impact of the Covid-19 crisis.
The expectations of a decrease in the income of family remittances, the time that the international economy could be depressed and the component of fear in the agents, are other causes of the upward pressure that the exchange rate has reported in the last hours.
During the first month of the year, family remittances sent to Guatemala registered a 22% year-on-year variation, a rise that exceeds the 8% increase registered in the same period in 2018.
According to the most recent figures from the Bank of Guatemala, in January 2020 the country received remittances of $834 million, an amount that exceeds by $46 million that registered in the same month of 2019.
In Guatemala, Banco de Inversión S.A. acquired 60% of the asset portfolio of Financiera de Occidente S.A., which was suspended in December 2019.
On December 13, 2019, the Monetary Board reported that because management practices were detected that put its solvency and soundness at risk, it decided to suspend the operations of Financiera Occidente S.A., an entity that at that time represented 0.35% of the total assets of the local banking system.
With a new methodology, the Banco de Guatemala determined that the value of the informal economy already adds up to the equivalent of 22% of the Gross Domestic Product.
The new calculation used by the Banco de Guatemala (Banguat) to measure national production now includes the measurement of the informal economy, mainly its participation in productive activity.
From January to September 2019, family remittances to Guatemala totaled $7.748 million, 14% more than in the same period in 2018.
The most recent figures from the Bank of Guatemala (Banguat) indicate that in September 2019 the country received remittances of $892 million, 20% more than the $745 million recorded in the same month in 2018.
Although Guatemala and the U.S. have already signed an agreement on migration issues, the exchange rate reported a slight increase and the upward trend is expected to continue over the next few days.
President Trump's warning to Guatemala to impose export tariffs and taxes on remittances and transfers had a direct impact on the exchange market.
Data from the Banco de Guatemala indicate that between July 23 and 29 the price of the Quetzal with respect to the US dollar increased from Q7.64 to Q7.68, which according to the authorities is explained by the uncertainty generated by the possible sanctions against the country.
At the end of June in Guatemala, credit to the private sector registered a 7% year-on-year growth, which is explained by the upturn in mortgage and consumer loans.
Figures published by representatives of the Banco de Guatemala specify that at the end of the first semester of the year, the total credit to the private sector reached $26.571 million, amount that is 6.9% higher than that reported a year ago.
Although poor social indicators and a low tax burden are a threat to the country's progress, for Fitch the Guatemalan economy has the capacity to overcome external adversities.
After the last visit of Fitch Ratings to Guatemala, representatives of the rating agency expressed the opinion that health, education and security indicators, together with the tax situation, are issues that should concern the country.
The behavior of credit to the private sector, public spending, imports and remittances would explain the higher growth expected for the economy this year.
The Bank of Guatemala (Banguat) reported that this year's economic growth is projected to range between 3% and 3.8%, with a central value of 3.4%, up from the 3.1% reported during 2018.
In 2018, the construction sector in Guatemala registered a nearly 4% growth, which reinforces the upward trend that has been reported since 2011.
Data from the Guatemalan Chamber of Construction (CGC) detail that from 2011 the sector has reported growth rates, reaching its highest level in 2014 when the recorded increase was 4.4%.
The growth of family remittances, the recovery of credit to the private sector and the upturn in investment in capital goods would determine a better economic performance this year.
In a forum organized by the Chamber of Industry of Guatemala, representatives of the Bank of Guatemala (Banguat) and Central American Business Intelligence (CABI), agreed that this year the country's economy could register a better performance than in 2018.
The Bank of Guatemala expects next year's economic growth to be better than in 2018, which would be caused by higher public spending and the growth of family remittances.
Authorities of the Bank of Guatemala (Banguat) informed that the Guatemalan economy will close 2018 with a nearly 3% growth, however, for next year is expected that the increase in GDP will be in the range between 3% and 3.8%.
Between 2014 and 2017, the fiscal deficit increased to an average of 1.4% of GDP, and for this year the authorities plan to end at 1.6% and in 2019 it could increase to 2.5%.
Representatives of the Ministry of Public Finance informed that some of the increase in the fiscal deficit foreseen for next year will be caused by the fact that the General Budget of Income and Expenditure of the State for Fiscal Year 2019, which will ascend to $11,390 million, will allow assigning more resources for infrastructure maintenance.
Guatemala exported $10 million worth of electricity to the neighboring country in the first seven months, significantly more than the one million dollars reported in 2017.
Sergio Recinos, Banco de Guatemala president, said to Dca.gob.gt that "... With regard to this activity, greater dynamism is expected in electricity generation associated with the expected increase in external demand from Mexico and the restructuring of the energy matrix'.”
Since the beginning of the year Banco de Guatemala has intervened in the foreign exchange market buying foreign currency in order to curb appreciation of the local currency against the dollar, but in recent weeks it has been selling currencies in order to minimize depreciation.
In recent weeks the exchange rate of the Quetzal against the US dollar has been trending upwards, which has forced the Bank of Guatemala (Banguat) to sell foreign currency in the foreign exchange market.So far this year, up until September 24, it has had to intervene selling $402 million worth of foreign currency.
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