Thanks to prudent macroeconomic management, Guatemala has been one of the strongest economic performers in Latin America in recent years, with a GDP growth rate of 3.0 percent since 2012, and nearly 4.0 percent in 2015. Even so, it is one of the few countries in the region where poverty has increased in recent years, from 51 percent in 2006 to 59.3 percent in 2014.
This Central American country has made significant progress in achieving macroeconomic and democratic stability after a 36-year civil war. Since the signing of the Peace Accords in 1996, the country has improved its access to international markets through several trade agreements.
Guatemala, the biggest economy in Central America, has one of the highest inequality rates in Latin America, with some of the worst poverty, malnutrition and maternal-child mortality rates in the region, especially in rural and indigenous areas.
The World Bank study Poverty Assessment in Guatemala reported that the country reduced its poverty rate from 56 percent to 51 percent between 2000 and 2006. However, official figures indicate that poverty rose to 59.3 percent in 2014. The situation is particularly difficult in nearly half of the country’s rural municipalities, where eight out of 10 people are poor, according to the 2011 Rural Poverty Map.
Given Guatemala’s capacity for macroeconomic recovery, the next few years present an opportunity to reduce poverty through more rapid economic growth. While pro-poor policy reforms could yield marginal improvements, accelerating growth will be crucial to achieving the country’s medium- and long-term social objectives.
According to World Bank estimates, if Guatemala grows at a rate of 5.0 percent over the next few years and that growth does not come at the expense of the poor, the marginal impact on poverty and equity will be significant. The poverty rate would fall by an additional 1.0 percent by the end of 2016, enabling an additional 160,000 people to escape poverty.
Public investment is essential to achieving Guatemala’s development goals, yet it remains constrained by a lack of resources. Additionally, the government collects the lowest share of public revenues in the world relative to the size of its economy. Boosting growth will depend upon continued reforms to mobilize increased private investment and revenue to fund important pro-growth investments in infrastructure and human capital.
An increasingly important challenge for Guatemala is improving the levels of citizen security. High levels of crime and violence represent staggering economic costs for the country.
The main challenges for the new government administration in 2016 include fostering transparency and inclusive growth, addressing social inequalities and ensuring revenues to finance public spending on education, health and infrastructure, among others.
Last Updated: Apr 04, 2016