The World Bank In Guatemala

With a population of 18 million and a GDP of US$77.6 billion in 2020, Guatemala is the largest economy in Central America. Over the last three decades, Guatemala had the least volatile growth among its structural and aspirational peers. Public debt and the budget deficit have been historically among the lowest and most stable globally, providing some resilience to external shocks. Measured by its GDP per capita (US$4,603 in 2020), Guatemala is an upper middle-income country.

However, the economic stability and upper middle-income status have not translated to a significant reduction in poverty and inequality. Low central government revenues (11 percent of GDP on average in recent years and an estimated 10.8 percent in 2021) limit capacity for public investment and restrict both the quality and coverage of basic public services, from education and health to access to water, largely explaining the lack of developmental progress and large social gaps, trailing behind the rest of Latin America and the Caribbean (LAC).

Guatemala has the fourth highest rate of chronic malnutrition in the world and the highest in LAC, with Indigenous and rural populations disproportionately affected. Chronic childhood malnutrition (and stunting) affects 47 percent of all children under the age of five, 58 percent of indigenous children, and 66 percent of children in the lowest income quintile.

The COVID-19 pandemic ended three decades of economic growth in Guatemala. Still, the country experienced one of the smallest GDP contractions in 2020 in LAC (-1.5 percent), with economic activity already recovering to pre-pandemic levels during the first quarter of 2021, supported by a record-high inflow of remittances.

In 2020, the Government’s fiscal stimulus to respond to the pandemic (equivalent to 3.3 percent of GDP) was swift and focused on protecting the poor and vulnerable. This unprecedented effort included the large scale-up of safety nets from 5 to 80 percent of households, through temporary cash transfers.

Poverty increased slightly from 45.6 percent of the population to 47 percent in 2020. It is estimated that without social protection programs poverty would have increased three to four times more in Guatemala. Poverty is projected to decrease to 45.9 percent in 2021.

A strong recovery is expected for Guatemala, with GDP projected to grow by 5.1 percent in 2021 and 4.1 percent in 2022. Risks remain, particularly given the uncertainty of COVID-19 developments. The Delta variant caused a surge in new cases during the third quarter of 2021 and by September only 15 percent of the population had been fully vaccinated. If the public health crisis worsens again, economic recovery could be hampered.

Boosting robust, inclusive growth and reducing poverty in Guatemala will require continued efforts to raise productivity growth and facilitate the entry of women into the labor market; increase investments in human capital, innovation and resilient infrastructure; and address challenges in transparency, governance, and citizen security, among others.

Last Updated: Oct 06, 2021

Since COVID-19 struck, the World Bank’s response to the pandemic focused on saving lives, protecting the poor and vulnerable from the economic impacts of the crisis, and promoting growth. Toward that end, the Bank approved for Guatemala i) a budget support loan of US$ 500 million promoting policies that mitigate the social and economic impact of the pandemic, enhance public sector transparency, and increase domestic resource mobilization; and ii) an agriculture project (US$ 150 million) that seeks to reduce food losses, increase the adoption of climate-resilient technologies, and support the COVID-19 emergency response for beneficiaries in select value chains. A US$ 200 million Cat-DDO loan, to increase Guatemala’s capacity to quickly mobilize resources in the aftermath of adverse natural events or health related emergencies, was also disbursed in April 2020, triggered by the pandemic.

The World Bank work program in Guatemala is focused on addressing the health threat and the social and economic impacts of the COVID-19 crisis, while supporting sustainable and inclusive recovery. The World Bank's active portfolio in Guatemala amounts to US$ 950 million and includes four operations. Two of those operations are pending approval by the National Congress—the US$ 500 million budget support and the US$ 150 million agriculture project, while US$ 100 million Crecer Sano child health and nutrition project, approved in 2017, continues to be under implementation.

The portfolio is complemented by technical assistance and analytical services focused on governance, transport, human capital development, social safety nets and disaster risk insurance. Going forward, the World Bank’s program in Guatemala will continue to focus on building back better and more resilient institutions and promoting climate-smart growth.

The World Bank is updating the Systematic Country Diagnostic, a comprehensive assessment of Guatemala's growth and inclusion challenges for the coming years. This analysis will serve as a reference to prepare a new Country Partnership Framework in 2022 to support Guatemala in promoting reforms towards its long-term development vision.

Last Updated: Oct 06, 2021

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, which closed in 2014, 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 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. The project closed in 2016 and benefitted 1,600 families living in the departments of Baja Verapaz, El Progreso and Jalapa.

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, which closed in 2015. The cadastral information generated is now being used by 22 municipalities for multiple purposes, including territorial planning activities.

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.

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 enabled 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 could 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.

Facing one of the highest secondary school dropout rates in the Latin America and Caribbean region, Guatemala had several challenges in accurately identifying students at risk of dropping out and implementing more effectively targeted interventions. The World Bank’s technical assistance from 2018 to 2020 helped strengthen the capacity of Guatemala’s Ministry of Education to collect, manage, analyze, and use high-quality statistical information and pilot the use of an early warning system to identify at-risk students. The pilot, which was implemented in 3,000 schools and prevented approximately 850 children from dropping out, will be scaled up nationwide and will include a guide for teachers on low-cost interventions to prevent dropouts.

The study Towards Better Expenditure Quality: Guatemala Public Expenditure Review (2013) 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.

Last Updated: Oct 06, 2021