Ricardo Rodríguez, analyst at the firm Central American Business Intelligence (CA-BI), lists the course of the main economic indicators observed during the first quarter and the outlook for the rest of the year, which decision makers and economic agents should consider.
In his opinion, the political crisis has already passed and the new government authorities have finished settling down and are beginning to make decisions, the economic researcher points out in the following analysis.
In this first quarter, how did you see the economy?
Although Guatemala needs a much greater push, in general terms stability is observed, although we are still in the waiting phase that is usually provided for the first hundred days of the new government. The authorities are still settling in and some appointments are missing. So, the expected gross domestic product (GDP) growth for the year is 3.5%, which is the country’s potential.
Do you think the political and economic uncertainty that characterized 2023 has passed or is there still a remnant?
We have already overcome the uncertainty of whether we would reach January 14 or not. But the road blockades recorded in October did weigh on the country in terms of economic efficiency. Some have said that it had no impact, but the figures for the monthly index of economic activity (Imae), which in September had been growing at 3.3%, dropped to 1.5%, while the following month it had not fully recovered (2.7 %).
Regarding Congress, it also took its inertia so the panorama is clearer. The consequences of that period could still affect some sectors, but a more detailed study would have to be made of each economic activity, since at least until December, the economy was still being reestablished.
In the business climate, investments, and confidence in economic activity, what would be expected for the following quarters?
The first quarter was one of caution and it is not that investments are leaving the country or a panorama of that nature, but that we still need to know what plans the government brings. I understand that one of the priorities is to attract foreign direct investment flows (FDI) and the appointments of the authorities in the Ministry of Economy (Mineco) send that message.
Definitely, companies already established in Guatemala, national or foreign, want to be clear about the terrain in which they are going to get involved. So, in the first half we will not see much investment flows, but if the messages from the government are sent positively, in the second half we would see more momentum.
“We have already overcome the uncertainty of whether we would reach January 14 or not. But the road blockades registered in October did weigh on the country in terms of economic efficiency”
Ricardo Rodríguez, CA-BI analyst
Do you foresee that there may be any shock In the economy?
Internally we always have the climate issue with the effects of The boy, and there is talk that maximum temperatures could exceed those of 2023, when a very intense summer occurred. All of this affects agricultural production, an issue that represents a risk.
They are more concerned about shocksexternal, since the geopolitical issue is still latent, such as the war between Russia and Ukraine; the conflict in Israel; the bombings in Yemen against traffic in the Red Sea; and the problems between China and Taiwan.
To this we must add that the elections in the United States are coming next November and that can change the political panorama of the main world power, on which Guatemala depends a lot.
What would be the main effects?
What happened in 2022 could be unleashed with prices. For example, if any of these conflicts intensify, in April the prices of a barrel of oil and even those of wheat and corn could skyrocket. Today, the market does not see it as a latent risk, but it is always something to “keep on the radar.”
What must be done to achieve growth rates above the average of 3%?
What we would all like is to achieve sustained growth above 6% for 20 years to be able to escape the current underdevelopment. To do? From my perspective, the government should focus on laying the foundations and creating incentives so that the private sector can generate that economic growth. It is evident that, in Guatemala, the public sector is not what drives the economy.
So, more investments must be attracted, because the country has a lot of potential and I dare say that unless a catastrophe happens, Guatemala will not stop growing at 3%, no matter what is done, since it is a young and with a large market.
But that gives a minimum of growth and to reach double, it is necessary to develop the potential of the different sectors, as well as achieve greater legal certainty.
In addition, the government is tasked with improving infrastructure to be able to move people and goods efficiently to borders, ports and tourist sites. If incentives, legal certainty and conditions are maintained that do not change overnight, the country can grow in a better way.
What would be your message for economic agents?
It must be recognized that Guatemala has great opportunities, but we must know how to take advantage of them. And the public sector must do its job well. In any case, we must be optimistic, but without sitting back and waiting.
#Guatemalan #economy #returns #normal #risks #persist #CABI