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Country Risk Service Guatemala June 2011

  • Publication Date:June 2011
  • Publisher:EIU
  • Product Type: Report
  • Pages:24

Country Risk Service Guatemala June 2011

Overview

The president, Alvaro Colom, of the centre-left Unidad Nacional de la Esperanza (UNE)-whose term ends in January 2012-will try to implement policies that boost his (former) wife's and party's electoral prospects ahead of the elections on September 11th. The Economist Intelligence Unit expects voter concerns over public security to bring Otto Perez Molina, the leader of the right-wing Partido Patriota (PP), to victory in the general election, owing to his anti-crime platform and high public recognition. In the absence of reform, a low tax take and rigid expenditure commitments (combined with pre-election spending in 2011) will keep the deficit at around 3% of GDP throughout the forecast period. Driven by private and public consumption, GDP is forecast to grow by 3% in 2011 before accelerating to 3.3% in 2012, driven by strengthening domestic demand as electoral uncertainty diminishes. Inflation will exceed the upper limit of the 4-6% target band of the Banco de Guatemala (Banguat, the central bank) in 2011, driven by high international prices for food and energy. It will ease only slightly in 2012, owing to monetary tightening and a slight fiscal adjustment. A larger trade deficit in 2011 will widen the current-account deficit further, to 5.1% of GDP, from 2.1% of GDP in 2010. A weaker transfers surplus will lift the current-account deficit to 6.3% of GDP in 2012.

Key changes from last month

Political outlook

The acquittal of a former president, Alfonso Portillo, of embezzlement charges, has dealt a heavy blow to the International Commission Against Impunity in Guatemala (CICIG).

Economic policy outlook

Despite being Central America's largest economy, Guatemala lags behind its neighbours in attracting foreign direct investment (FDI) owing to its poor educational environment. In 2010 it received just US$710m (1.7% of GDP).

Economic forecast

Fourth quarter 2010 data show that real GDP grew by 3.1% year on year-the highest rate since the fourth quarter of 2008-bringing full-year growth to 2.8%, an upward revision of Banguat's previous estimate of 2.6%.

This report covers the following industry codes:
SIC Code: 13;15;59;60;53
NAICS Code: 211;23;44;52

  • Guatemala at a glance: 2011-12
    • Risk assessment
    • Sovereign risk
    • Currency risk
    • Banking sector risk
    • Generic risks
    • Country risk
    • Rating definitions
    • Central scenario for 2011-12: Political stability
    • Central scenario for 2011-12: Election watch
    • Central scenario for 2011-12: International relations
    • Central scenario for 2011-12: Policy trends
    • Central scenario for 2011-12: Fiscal policy
    • Central scenario for 2011-12: Monetary policy
    • Central scenario for 2011-12: Economic growth
    • Central scenario for 2011-12: Inflation
    • Central scenario for 2011-12: Exchange rates
    • Central scenario for 2011-12: External sector
    • Central scenario for 2011-12: External financing requirement
    • Central scenario for 2011-12: External debt
    • Key risk indicators
    • Ratings summary
    • Quarterly indicators
    • International assumptions summary
    • Economic structure
    • Public finances
    • Exchange rates, interest rates and prices
    • Financial sector
    • Current account
    • International liquidity
    • Foreign payment and liquidity indicators
    • External trade
    • External financing requirement
    • External debt stock
    • External debt service
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