A multi-cultural country, Guatemala has made significant progress in achieving macroeconomic and democratic stability after a 36-year civil war.
As from the signing of the 1996 Peace Accords, Guatemala has made progress in strengthening institutions and opening international markets through several trade agreements.
Guatemala has maintained relatively stable economic growth during recent decades. A prudent macroeconomic management enabled an annual average growth of 4.2% between 2004 and 2007. However, the global financial crisis declined that growth to 0.6% in 2009.
While surges in demand for exports and a moderate fiscal stimulus helped cushion the impact of the crisis, a series of natural disasters hit Guatemala in 2010 and 2011 causing an estimated US$1.8 billion in damages and losses.
In spite of these challenges, Guatemala has huge potential to speed up its economic growth through trade, regional integration and tourism. The country’s economy recovered recently, with a 2.9% growth in 2010; 4.1% in 2011; 3.0% in 2012, and an estimated 3.3% in 2013. The forecasted economic growth for 2014 is 3.4%.
Guatemala is the biggest economy in Central America but is among Latin American countries with the highest levels of inequality, with poverty indicators —especially in rural and indigenous areas— among the highest in the region.
Chronic malnutrition and mother-child mortality rates are also amongst the highest in the region. The Human Development Index (2013) ranks Guatemala 133 among 187 ranked countries and in last place in Central America.
The World Bank study Poverty Assessment in Guatemala showed that the country was able to reduce poverty from 56% to 51% between 2000 and 2006. However, official estimates indicate that poverty rose again to 53.7% in 2011. The situation is particularly difficult in rural municipalities, which account for 44% of the country. There, almost eight out of 10 people are poor, according to the outcomes of the 2011 Rural Poverty Map.
An increasingly important challenge for Guatemala is improving the levels of citizen security. The World Bank report Crime and Violence in Central America: A Development Challenge estimates that crime and violence represent staggering economic costs for the country, equivalent to 7.7 percent of its GDP.
President Otto Perez took office in January 2012, pledging a tough stance on crime and a commitment to strengthen social programs and to promote employment through competitiveness reforms. The political panorama remains challenging for the Executive branch, as it does not have legislative majority and Congress has remained virtually paralyzed.
The main challenges for the government 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 09, 2014