IMF Urges Guatemala to Push Reforms as Economy Shows Resilience
The Executive Board of the International Monetary Fund (IMF) has concluded its Article IV Consultation with Guatemala, commending the country’s prudent macroeconomic management, which has underpinned resilience, low inflation, and improved access to international markets.
The Fund noted that Guatemala has maintained ample policy buffers, a positive current account in recent years, and robust external positions, but stressed that deeper reforms are required to transition the economy into a high-investment, high-growth path capable of reducing poverty meaningfully.
Growth Outlook
The IMF projects GDP growth of 3.8 percent in 2025, supported by expansionary fiscal policy to counter softening private demand. Growth is expected to moderate to around 3.5 percent in 2026–27, reflecting external headwinds from global trade and migration policy uncertainty, before converging toward 4 percent in later years on the back of infrastructure investments and governance reforms.
Inflation is forecast to gradually ease to the central bank’s 4 percent ±1 target range, while fiscal deficits of around 3 percent of GDP are expected to persist in the medium term, pushing public debt to about 30 percent of GDP by the end of the projection horizon.
Risks and Reform Priorities
The IMF warned that risks are tilted to the downside. Domestically, political constraints limit reform opportunities. Externally, shifts in global trade, growth prospects, and migration policies could affect investment and remittance-supported consumption. The economy also remains vulnerable to severe weather events.
The Fund’s Executive Directors welcomed the authorities’ expansionary fiscal stance for 2025 but urged fiscal consolidation in the medium term, with deficits reverting to historical averages of around 2 percent of GDP. They underscored the need for revenue mobilization, improved public financial management, and more efficient and better-targeted social spending.
On monetary policy, Directors deemed the current stance appropriate but called for stronger policy coordination between the central bank (Banguat) and the Ministry of Finance to address sterilization costs and encouraged greater exchange rate flexibility.
Financial Sector and Governance
The IMF commended the resilience of the financial system but urged further reforms, including revision of the 2002 Banking Law, adoption of e-money legislation, implementation of the financial inclusion strategy, and enhancements to macroprudential oversight.
Directors also highlighted the importance of strengthening governance, calling for the passage of laws on anti-money laundering, beneficial ownership, whistleblower protection, and public procurement. They stressed stronger oversight of municipal investment projects managed by Department Development Councils (CODEDEs) to mitigate corruption risks.
