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Overview

  • Guatemala has experienced economic stability due to a combination of prudent fiscal management, inflation targeting, and a managed floating exchange rate. The Guatemalan economy -the largest in Central America- has also had a solid performance, although with moderate growth rates of 3.5 % on average in the last five years.

    This economic stability, however, has not translated to a significant reduction in poverty and inequality. Measured by its GDP per capita (US$ 4,549 in 2018), Guatemala is the fifth poorest economy in Latin America and the Caribbean (LAC), with persistently high rates of poverty and inequality.

    Guatemala also has the sixth highest rate of chronic malnutrition in the world and the highest in LAC. Chronic childhood malnutrition (and stunting) affects 47 % of all children under the age of five, 58 % of indigenous children, and 66 % of children in the lowest income quintile. In 2019, Guatemala ranked 68th in food security out of 113 countries, with only 40 % of Guatemalan families enjoying food security.

    Low central government revenues (11 % of GDP on average in recent years and an estimated 9.7 % in 2019) limit capacities for public investments and restrict both the quality and coverage of basic public services, from education and health to access to water. This, in turn, perpetuates a lack of incentive in the economy for formality and tax paying.

    Disrupting billions of lives and livelihoods in the world, the COVID-19 pandemic threatens decades of hard-won development gains. In a more moderate scenario, the global economy could shrink by 5.2 % in 2020 before rebounding in 2021; in a more negative scenario of prolonged shutdowns, world output could contract by almost 8 % in 2020.

    The pandemic has affected the Guatemalan economy considerably —it is expected to contract by 3 % in 2020—, leading to substantial adverse social effects and worsened existing vulnerabilities.

    • Firms, particularly MSMEs, providing more than 90 % of private jobs, have been affected significantly due to lockdown measures, falling demand, bottlenecks in supply chains and drying liquidity as revenues collapse.
    • Jobs losses are expected to be highest in construction, services, transport and commerce, where most of the vulnerable workforce is concentrated, and where female employment is also most prominent.
    • The incomes of the self-employed (around 40 % of the labor force), temporary workers and workers in affected sectors (e.g., tourism and entertainment) will slump.
    • The recession in the U.S. could affect exports and remittance inflows, the largest two sources of foreign exchange earnings, and exacerbate the private consumption slowdown.

    Approximately one million people are expected to fall into poverty, raising the country’s poverty rate by as much as 6 percentage points, depending on the depth and duration of the crisis as well as the speed of the economic recovery.

    Additionally, Guatemala is extremely affected by climate and weather events and its poorer populations are particularly vulnerable. Guatemala ranks ninth in the world for level of risk to the effects of climate change.

    Last Updated: Sep 04, 2020

  • Since COVID-19 struck, the World Bank has been working intensely on fast, broad actions to limit the harm and help countries, including Guatemala, prepare for recovery and rebuilding better and stronger than before, by focusing on four priorities:

        i) saving lives threatened by the pandemic;

        ii) protecting the poor and vulnerable;

        iii) securing the foundations of the economy to shorten the time to       recovery; and

        iv) strengthening policies and institutions for resilience based on transparent and sustainable debt and investments.

    The World Bank's active portfolio in Guatemala amounts to US$ 320 million, and includes US$ 200 million in budget support in case of emergencies (disbursed to support the response against the COVID-19 pandemic), a US$ 20 million health investment project to support the pandemic response and the US$ 100 million Crecer Sano project, focused on reducing chronic child malnutrition. The World Bank is also discussing possible additional financial support with Guatemalan authorities to protect vulnerable populations, mitigate the social and economic impact of the pandemic and support economic reactivation, and a possible investment project to support productivity in the agricultural sector.

    The World Bank's current work program in Guatemala also includes technical assistance initiatives to strengthen the financial development of micro, medium and small enterprises (MSMEs), the Government’s human resources management systems, and safety net delivery systems, among others. It also includes initiatives aimed at increasing statistical development capacities in the education sector, modernizing the country’s financial sector and increasing market access for women farmers.

    The World Bank plans to update in 2021the Systematic Country Diagnostic, a comprehensive assessment of Guatemala's growth and inclusion challenges for the coming years. This analysis will also serve as a reference to adapt the World Bank's work program and support Guatemala in promoting reforms towards its long-term development vision.

     

    Last Updated: Sep 04, 2020

  • Technical support provided by the World Bank and UNICEF to the Ministry of Social Development, for designing a comprehensive information management system and strengthening its social protection systems, allowed the Government of Guatemala to rapidly expand its cash transfers program in 2020 and create the “Bono Familia” to support families during the COVID-19 pandemic. The “Bono Familia” platform enables beneficiary families (around 2 million) to be identified through a simplified verification process, minimizing personal contact, and the delivery of 1,000 quetzales (US$ 134) per family through “simplified bank accounts”. Money can be received in bank branches or ATMs or used to pay for goods in stores, allowing the expansion of digital payments for thousands of families who lacked access to bank accounts.

    The Project to Support a Rural Economic Development Program improved the competitiveness of rural value chains and strengthened the institutional capacity of public entities through the adoption of a land management model. Results of this project include support for more than 200 partnerships with a high participation from indigenous groups; an increase of US$ 16.4 million in these associations’ total sales; rehabilitation and construction of bridges to benefit 160,000 people, and support for the development of 324 municipal development plans.

    The Second Land Administration Project helped improve land tenure security for close to one million people (51 % of which are women) and resolve land conflicts. More than 1,600 indigenous families received titles and four communities benefited from communal land certification, a historic precedent set by the Project. The cadastral information generated is now being used by 22 municipalities for multiple purposes, including territorial planning activities.

    The Maternal-Infant Health and Nutrition Project helped to provide access to basic health and nutrition services for over one million people through the building or renovation of 35 health centers for maternal and child care, training of more than 5,000 health workers and support to the Comprehensive Community Care program for Children and Women (AINM-C) in 142 jurisdictions, among other activities. The maternal mortality rate declined by more than 50 percent between 2006 and 2012 in the intervention areas, while the percentage of pregnant women who received prenatal care increased from 54 % in 2006 to 89 % in 2012.

    Through the Project to Strengthen the Resilience of the Maya and Rural Residents Facing Food Insecurity and Climate Change in Guatemala’s Dry Corridor, the World Bank helped the population cope with climate change through ecologically-sensitive, lower-cost production systems, which increased productivity levels and contributed to food security. Project beneficiaries included 1,600 families living in the departments of Baja Verapaz, El Progreso and Jalapa.

    The study Towards Better Expenditure Quality: Guatemala Public Expenditure Review analyzed the quality of the country’s public expenditures in education, health, citizen security and other sectors. The study found that targeting of social spending could be improved given that public education and health expenditures do not benefit regions with the greatest need. The study also identified a need to boost resources to improve citizen security, especially for preventive programs, police forces, penitentiary and rehabilitation systems and for strengthening capabilities of the public prosecutor’s office.

    World Bank support through the Competitiveness Project was instrumental in strengthening the National Competitiveness Program (PRONACOM) and the operational startup of the INVEST in Guatemala Agency, which succeeded in facilitating US$ 944 million in new foreign direct investments, resulting in the creation of 73 new firms and 24,000 new jobs between 2005 and 2008.

    Last Updated: Sep 04, 2020

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

*Amounts include IBRD and IDA commitments


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Additional Resources

Country Office Contacts

GUATEMALA +502 2329-8000
13 Calle 3-40, Zona 10, Edificio Atlantis, Piso 14, Guatemala
cleonjuarez@worldbank.org
USA +1 202 473-1000
1818 H Street NW, Washington, DC 20433
adavis@worldbankgroup.org