Overview

A multi-cultural country, Guatemala has made significant progress in achieving macroeconomic and democratic stability after a 36-year civil war. Since the 1996 Peace Accords, the country has opened to 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. After the 2008-209 global financial crisis, the economy has recovered at a modest but consistent pace, with economic growths of 3.0 percent in 2012, 3.7 percent in 2013 and an estimated 4.2 in 2014. A forecasted average growth of 3.6 percent during 2015-2016 will be driven by rising private consumption, and export and remittances growth.

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— and chronic malnutrition rates among the highest in the region.

The World Bank study Poverty Assessment in Guatemala showed that the country was able to reduce poverty from 56 percent to 51 percent between 2000 and 2006. However, official estimates indicate that poverty rose again to 53.7 percent in 2011. The situation is particularly difficult in rural municipalities, which account for 44 percent of the country. There, almost eight out of 10 people are poor, according to the outcomes of the 2011 Rural Poverty Map.

Building upon Guatemala’s recent macroeconomic resilience, the coming 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 its medium-term poverty and social objectives. According to World Bank estimates, if Guatemala grows at 5.0 percent over the next 3 years and the growth does not come at the expense of the poor, the marginal impact on poverty and equity will be significant. The poverty headcount rate would fall by an additional 1.0 percent by the end of 2016, allowing over 160,000 more people to escape poverty.

Public investment is essential to achieving Guatemala’s development goals, yet it remains tightly constrained by a lack of resources, and the government continues to collect 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 greater private investment, while improving revenue mobilization to fund important growth-enhancing investments in infrastructure and human capital.

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.

The main challenges for a 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: Aug 18, 2015

Based on consultations with representatives from the civil society, the private sector and the international community and in a coordinated effort with the government, the World Bank prepared the Country Partnership Strategy (CPS) for 2013-2016.

This CPS was also designed in close coordination with the Inter-American Development Bank (IDB) to ensure complementarities and consistency between both institutions.

The 2013 2016 CPS focuses on two strategic objectives:

  • Strengthening public policies for social development
  • Promote inclusive and sustainable growth

These objectives include initiatives to create fiscal space for social spending and improve the transparency and efficiency of social programs, as well as strengthening disaster risk management, improve infrastructure and logistics to facilitate international trade and stimulate the growth of micro, small and medium enterprises.

Two keys issues for Guatemala’s development —citizen security and gender equality— have been mainstreamed in all CPS activities.

The current World Bank portfolio in Guatemala consists of three projects amounting to $174.3 million, with a focus on promoting rural and social development and productivity. These projects are:

Enhancing Micro, Small and Medium Enterprise Productivity

This project will improve the productivity of micro, small and medium enterprises (MSMEs) in Guatemala's tourist and agribusiness sectors. This $32 million project aims to bolster MSME growth by increasing added value, product quality and integration into national and international markets.

Land Administration II

This project aims at securing land tenure in 41 municipalities in the country’s seven departments by providing efficient and accessible land registers and management. As of June 2015, 213,210 land parcels have been registered in the database of the Registry of Cadastral Information, while over 850,000 people have benefitted from the project’s activities.

Education Quality and Secondary Education

The objective of this $80 million project is to improve access to a quality lower secondary education for low income students, especially indigenous communities. As part of this project, 14,451 students graduated from the Accelerated Primary Education Program and around 10,000 teachers completed the in-service training program in 196 targeted municipalities. Also, 25,000 students from low-income families were benefitted with scholarships to ensure they complete their lower secondary education and more than 5,000 classes now have Telesecundary equipment and materials. The projects has increased the number of students attending lower secondary education in these municipalities from 36,000 in 2007 to 82,600 in 2014.

Last Updated: Aug 18, 2015

Competitiveness Project
This project was instrumental for strengthening the National Competitiveness Program (PRONACOM) and the operational startup of the “INVEST in Guatemala” agency, which succeeded in attracting and facilitating $944 million in new foreign direct investments and the creation of over 24,000 new jobs between 2005 and 2008.

Maternal-Infant Health and Nutrition Project

This project helped to provide access to basic health and nutrition services for 1,094,000 people, by building or rehabilitating 35 health centers for maternal and child care, training 3,342 health workers in 2010 and 2,011 in 2011, and supporting the preventive nutritional program AINM-C in 142 jurisdictions, among other activities. The maternal mortality ratio was reduced by more than 50 percent between 2006 and 2012 in the intervention areas, while the percentage of pregnant women who attended to least one prenatal visit increased from 54.2 percent in 2006 to 89 percent in 2012.

Project to Support a Rural Economic Development Program

The project improved the competitiveness of rural productive supply chains with strong indigenous participation and strengthened the institutional capacity of the public entities through the adoption of a territorial management model. Some results from this project include the creation of 200 new productive supply chain partnerships; an increase of US$20.3 million of these partnerships’ total sales, and support for the development of 324 municipal development plans.

Public Expenditure Review

This study analyzed the quality of Guatemala’s public expenditures in education, health and citizen security, as well as other sectors. The Public Expenditure Review found that there is room to improve the targeting of social spending, as public education and health expenditures do not benefit regions with the greatest need. Also, the study found a need to boost resources to improve citizen security, especially for preventive programs; police manpower and equipment; improved prosecutors office capabilities; and penitentiary and rehabilitation systems.

Last Updated: Aug 18, 2015


LENDING

Guatemala: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments