International Monetary Fund Confirms Stability of Guatemalan Economy

A report highlights strong foundations thanks to prudent economic policies and a historical record of international reserves.

by Pamela Contreras

Guatemala City, -AGN-. According to the International Monetary Fund -IMF- report on the Chapter IV Consultation, Guatemala remains an economy with multiple opportunities to attract foreign investment.

The report states, “Guatemala’s solid track record of prudent macroeconomic policies and large remittance inflows provided the country with large buffers to weather a challenging global environment and tightened global financial conditions.”

During a press conference last Wednesday, Bank of Guatemala authorities presented the main conclusions of the official report.

The IMF’s evaluation carried out in March of this year recognized, among other aspects, the resilience of the national economy.

Main conclusions

The Executive Director of the Foundation for the Development of Guatemala -Fundesa- highlighted that Guatemala’s strength was shown in  external and internal crises. Also, he highlighted the confirmation of Guatemala’s stability reflected in the report.

The IMF also stressed the importance of promoting social policies that meet the needs of the citizens and fostering an environment of greater legal certainty. This way, sustainable and inclusive growth would be achieved in the medium term with greater growth potential.

Furthermore, it reiterated the importance of attracting foreign investment and reducing the infrastructure and human capital gap, and promoting the route established in the Guatemala Moving Forward initiative.

The initiative has achieved significant progress in economic legislation, investment attraction, and export strategy.

Economic Perspective 

The outlook for the Guatemalan economy remains positive, although uncertainty and risks from external scenarios persist.

The report stresses that the long history of economic stability and conservative policy management has strengthened the economy’s resilience to external situations.

According to the report, the country’s authorities’ efforts to achieve an investment rating and attract foreign investors could create new opportunities.

The IMF’s evaluation, the Guatemalan economy continued to show resilience in 2022, with economic growth exceeding its potential.

In the report, Guatemala has solid foundations due to prudent economic policy management, evidenced by average tax revenue. The country also has a low public debt-to-GDP ratio and a historical record of international reserves, which contributes to the country’s exchange rate stability.

The study also mentions that the above mentioned factors have been widely recognized internationally, as reflected in the fact that two of the three most crucial international risk rating agencies worldwide granted a better credit rating to Guatemala.

In this regard, the IMF stressed the need to maintain cautious tax and monetary policies that keep inflation expectations around the monetary authority’s goal.

What is Article IV?

Under Article IV, IMF officials continuously monitor the members’ economies and visit them usually annually.

This aims to exchange viewpoints with governments and central banks to determine whether risks threaten domestic and global stability that would justify adjustments to economic and financial policies.

The main areas discussed in this exchange relate to the exchange rate, monetary, fiscal, and financial policies, and critical structural macroeconomic policy.

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