2 minute read
Economic Outlook and Investment Climate
By Edy Oswaldo Pérez
Managing Partner
At the beginning of 2020, we Guatemalans were very excited, mainly due to the change in government authorities, the year was expected to have important changes in benefit of the population and the business climate.
The President, Dr. Alejandro Giammattei, presented as part of his economic plan, support for exports, the reactivation of private free zones, the start of operations of the Champerico free zone, the expansion of the Industry and Trade Free Zone (ZOLIC, the Spanish acronym) in Santo Tomas de Castilla and the building of a cargo airport in Puerto San José, among other projects. These projects were seen as a way to boost the economy to achieve that country growth that the business community was eagerly expecting. However, we have been affected by the global COVID-19 pandemic which has caused considerable economic effects in various sectors: Moreover, we have been hit by two tropical storms, ETA and IOTA that affected the north of Guatemala in 2020.
Despite all this, after the economic reopening in October 2020, we Guatemalans have moved ahead, already having positive results in economic indicators, after several months with data where we fell as much as -12%. According to the Bank of Guatemala, a positive growth of 1.1% in Monthly Indicator of Economic Activity (IMAE, acronym in Spanish) (www.banguat. gob.gt) had already been noticed by October. So that the "V" effect is happening faster than expected, which is very encouraging.
The International Monetary Fund projects that we will close 2020 with a negative result of -2% in Gross Domestic Product, the lowest in Latin America and a growth of +4% is expected for 2021 (https://www.imf.org). In this case, the Bank of Guatemala projects a growth of 2.9% in GDP for 2021, being more conservative.
About the latter, it is important to comment that Guatemala has shown a resilience to this new reality and we have seen how companies and Guatemalans have been adapting to new trends such as: Teleworking, social distancing, the use of new platforms for trade and new strategies using technology to continue developing business, all this coupled with the country's significant revenue source from remittances that helps consumption in the country, has allowed Guatemala to take steps forward at this complex stage.
2021 is full with new challenges. The fact that the vaccine is making progress, that people are following health measures, that the State is taking plans into action for the reactivation of the economy, generate therefore a different recovery outlook for our country. We will pay close attention to the projected country budget, which we believe can be an important tool for the State to promote a policy of reactivation that allows Guatemalan society to rapidly improve over the effects of 2020.
Guatemala must continue working to become a foreign investment destination, investing in areas such as: Legal and business certainty, resuming economic activation plans and also improving other systems like infrastructure, health, education, nutrition, as well as combatting corruption and organized crime. All this will allow the country to head towards an economic and social development that improves the conditions of all Guatemalans and the business climate.
