Imported Inflation Continues to Decline

The Monetary Board indicated that the decline in oil prices is a significant factor behind this phenomenon.

by Victor Cojulún
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Guatemala City, by Daniel Coromac -AGN- The Monetary Board -MB-, during a conference held on June 29 regarding the continuity of the main monetary policy interest rate, stated that inflation continues to decline, mainly imported inflation.

The Monetary Board, led by the President of the Bank of Guatemala -Banguat-, provided statistics of economic interest. The highlights are that inflation in Guatemala stands at 6.54% as of May, of which 74% is domestic inflation, and 26% is imported inflation. These figures bring the country closer to the goal of ending 2023 with an inflation rate of 4% +/- 1.

During the conference, the members of the Monetary Board mentioned that the inflationary pace is decreasing globally and nationally. This change is particularly favorable for Guatemala’s main trading partners.

Context of Inflation’s Peak

During the COVID-19 pandemic, global inflation surged rapidly due to market uncertainty, panic buying, and the resulting supply shortages.

Production worldwide declined due to pandemic restrictions, such as physical distancing, and many industries struggled to comply with regulations. Additionally, there were deaths, hospitalizations, quarantines, and workforce reductions due to mass layoffs or business closures.

Petroleum prices dropped during the quarantine time, although it would last for a short period with the pressure of the economic reactivation in 2021. This phenomenon impacted people’s economies even more, and Guatemala relied on subsidies to lighten the load on people’s budgets.

Moreover, after experiencing shortages and price instability caused by the production level compared to demand, prices remained higher as inflation persisted.

Fluctuation of Imported Inflation

Inflation increased in the international context as a result of the oil price rise. In March 2022, oil prices surpassed 110 dollars per barrel of crude oil. At that point, Guatemala started subsidizing fuel in April of the same year.

Imported inflation has significantly influenced the country’s economy. In 2021 and 2022, it accounted for more than 70% of total inflation in Guatemala.

The highest inflation rates in Guatemala were 9.7% in October 2022, with 71% of the total imported, and in February 2023, when it stood at 9.92%, with 60% of imported inflation.

Guatemala’s inflation rate has been declining since its peak in February. 

In May, Guatemala’s inflation stood at 6.54%, reducing the price escalation and leading to more stability. Between those months, inflation dropped by 3.38 %.

Goals for 2023

The decrease is also in response to the target of reaching 4 % +/-1 by the end of 2023. The current inflation level (6.54%) comprises 74% domestic inflation and 26% imports.

As to why not all prices have gone down in the market, the President of the Monetary Board stated: “If inflation is a positive value (greater than zero), prices will not go down. If a product costs 100 quetzals and the inter-annual inflation is 5%, it will cost 105 quetzals next year. If inflation were 0 %, then it would still be 100 quetzals. The prices show how inflation is decreasing and getting closer to the objective.”

Finally, another member of the Monetary Board pointed out that the National Institute of Statistics has registered significant reductions in the prices of:

  • Onion
  • Cilantro
  • Green beans
  • Corn
  • Propane gas

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