The national economy grew 3.3% during the first quarter of 2024 (4% in the same period of the previous year) and “this result was influenced by the increase observed in domestic demand, particularly in household final consumption expenditure and investment in machinery and equipment; as well as by the increase recorded in imports of goods and services,” the Bank of Guatemala (Banguat) stated in its report.
He adds that in the measurement of GDP by the origin of production, growth was recorded in most economic activities, mainly influenced by trade and vehicle repair (5.4%); financial and insurance activities (8.9%); the real estate sector (4.4%); health (7.3%); accommodation and food service (5.9%); and information and communications (3.5%), activities that together accounted for around 69% of the GDP variation rate in the quarter under study.
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On the other hand, during the first 90 days of the year, the national economy generated Q152 thousand 333.2 million, which would be in line with the forecast in the monetary, exchange and credit policy, regarding the indicator growing close to 3.5% at the end of the year, as a central or core value.
In the first quarter of 2023, the indicator stood at 4%; in 2022 at 4.7%; in 2021 at 4.5% and in 2020 at 0.8%, due to the effects of the health emergency and the different measures adopted internally and externally.
Negative variations and why
The report notes that 14 activities had a positive performance, but three sectors showed a decline: construction (-1.3%), mining and quarrying (-13.7%) and agriculture (-0.4%).
In the first case, construction works have a weight or participation of 5.6% in the structure of the economy and Fernando Estrada Domínguez, director of the Statistics Commission of the Guatemalan Chamber of Construction (CGC), explained that there was indeed and continues to be a slowdown in the sector, due to a paralysis in the approval of procedures and licenses, which, as a result, stops the execution of projects.
The low public spending in the sector also has an impact, since the approved budget of the Ministry of Communications, Infrastructure and Housing (CIV) for 2024 is Q6,580 million, but in the first quarter only 12% was executed.
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He also stressed the lack of agility in the Ministry of Environment and Natural Resources (MARN) in issuing environmental licenses, since there is little staff in the institution and a dam of unapproved files has accumulated. This also occurred in other institutions such as the National Coordinator for Disaster Reduction and the Ministry of Energy and Mines.
Regarding the closure prospects, Estrada said that as the new government finishes taking control and management of all institutions, it is expected that the management of the public apparatus in general will improve.
“There has indeed been and continues to be a slowdown in the sector, due to a paralysis in the approval of procedures and licenses, which, as a result, halts the execution of projects”
Fernando Estrada Domínguez, Guatemalan Chamber of Construction
“We believe that with good inter-institutional coordination between the public and private sectors, we can improve the country’s implementation, transparency and competitiveness,” he stressed.
Mining is inactive
As for mining and quarrying, the activity has a 0.5% share of the annual GDP and when explaining the performance reported in the first quarter, Valery Zurita, executive director of the Gremial de Recursos Naturales, Minas y Canteras (Grenat), assured that the main factor is the lack of reactivation of nickel projects, which although they have been stopped since the end of 2022, “it is now when the economic effect is really being felt at the national level.”
Added to this is “the lack of legal stability in which the sector is immersed, with a de facto moratorium and statements by authorities that increasingly weaken investor confidence.”
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In his opinion, the mining and quarrying sector can contribute much more at a national level, but what we are seeing today is nothing more than a reflection of the lack of concrete actions aimed at reactivation.
In this regard, he listed that the projects that contribute the most to the GDP are at a standstill, such as the El Escobal mine (San Rafael) that has not been operating for seven years; and the Sechol and Fénix projects that have been inactive for almost two years. “This means that around 90% of the industry is at a standstill, we cannot expect a positive performance with that scenario.”
Regarding the outlook for the closing of the activity, Zurita stressed that it is unlikely that a positive performance will be seen in the following quarters, but it is hoped that a reactivation of the industry this year will be reflected in the indicators for 2025.”
As for the three projects that are currently suspended (Escobal, Sechol and Fénix) and the one that is pending start (Cerro Blanco), they will require at least six months to prepare equipment, suppliers, hiring personnel, among others, to begin working formally, from the moment their operation is authorized.
“Positive performance is unlikely to be seen in the following quarters, but it is hoped that a revival of the industry this year will be reflected in the indicators for 2025”
Valery Zurita, Executive Director of the Natural Resources, Mines and Quarries Association
“The impact on the economic spillover would be practically immediate, but we will surely be able to see a positive performance in the national GDP until the second half of 2025. Of course, this will also depend on the willingness of the authorities to responsibly use the country’s natural resources,” he concluded.
Fall of agriculture
Regarding agriculture, livestock, forestry and fishing, it is a sector with a 9.8% share of GDP, behind trade (20.7%) and manufacturing (14%), but which was affected by various factors at the beginning of the year.
Fernando Zuloaga, agricultural manager of the Guatemalan Exporters Association (Agexport), emphasized that the negative performance of -0.4% in the agricultural sector is explained by the effects of climate change that caused large increases in temperature and an extensive drought that negatively impacted up to 20% of the estimated agricultural production.
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Added to this is the growing phenomenon of rural population emigration to Mexico and the United States, which has led to a serious shortage of labor. He also considered it important to highlight the lack of rural infrastructure, particularly roads, as well as serious limitations in irrigation systems and price increases in logistics services (freight and transport), which impact production costs.
Regarding what is expected in the following quarters, he mentioned a highly unstable agro-climatic activity with intense rains and hurricanes that might potentially cause serious damage to different crops, in addition to the increase in pests and diseases.
He also regretted the slowdown in supply in the different production chains due to damage to road infrastructure and, consequently, an increase in production costs, which implies lower production and a probable increase in consumer prices.
In tune
Álvaro González Ricci, president of Banguat, indicated that the monthly index of economic activity (Imae) grew 4.4% in May 2024 (3.8% in May 2023) with an accumulated increase of 3.6%, in line with the annual economic growth forecast for 2024 of 3.5%. And if the GDP in the first quarter was 3.3%, it is also in line with the annual projection.
As for foreign trade, as of May 2024, exports show a variation of -1.8% and although they are still in negative territory, they show a recovery compared to the fall of -6.5% recorded at the end of 2023, so it would be expected that they enter positive territory in the fourth quarter of 2024. Regarding imports, these show a growth of 8.1%, in line with what was expected, he concluded.
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