Guatemala: New broom in town
Guatemala. President Alejandro Giammattei´s January 14th inauguration speech contained a strong call for action against violence and corruption. He labeled the “maras” and gangs “terrorist groups,” saying the time had come to end the violence, a major factor affecting investment. He also argued for the need to work together to build a better future, in peace, progress and development. And he spent significant time talking about structural limitations to higher growth, and to improving the well being of low-income groups. The president called for a crusade against malnutrition and in favor of education, as a way to start building a better society.
Two days after his inauguration, Giammattei announced his government’s economic targets. An 85-page document, “Government´s General Policy 2020-2024,” lists 12 major goals and several success indicators, including acceleration of growth, from 3.4% to 6% by 2023 ( a very optimistic target, given recent history).
The Costa Rican economy closed 2019 with mixed signals. On one hand, economic slowdown, trend cycle, during Q2 2019 (1.5% y/y) improved in Q3 (to 1.95% y/y), and the Central Bank now estimates real GDP growth in 2019 at 2.1% y/y. Inflation closed 2019 at an annual rate of 1.51%, well below the 2% lower limit of the Central Bank´s target range. The central government’s cash flow during H2 was not tight, as the government was able to tackle the external markets.
On the other hand, unemployment continues to be a major problem, with an average open unemployment rate for January-September of 11.5%, up from 9.7% in the same period of 2018. The exchange rate was under appreciation pressure almost all year, given government strategy to cover its financial needs. The high interest rates paid by the government in H2 2018 and the beginning of 2019, together with the additional indebtedness due to the high fiscal deficit, increased the interest bill, making government´s financial deficit higher than in 2018.
El Salvador, weak economic activity in H1 2019 has reversed since Q3, according to short-term indicators, driven by construction, electricity, real estate and the financial sector. Despite the virtual stagnation of merchandise exports over the past two years, exports of services exhibited dynamism. Foreign remittances have slowed since 2018, but inflows still increased by nearly 5%, doubling real GDP growth. Economic growth in 2019 was not pushed by external factors, but by non-quantitative elements, such as improvement of the business and consumer climate created by the new government. Its friendlier relations with the private sector, and great popular acceptance, have increased general confidence. Real GDP growth could end 2019 in the range of our 2.1% y/y forecast, and the 2.5% registered in 2018. Preliminary Central Bank estimates set the figure at 2.3%, although the final result should be disclosed by March.
Now read on...
Register to sample a report