Central America’s largest economy
Guatemala is a 3.5% growth story without significant imbalances (assuming remittances continue). It should be growing faster, but for growth to break out on the upside, a significant step up in infrastructure and investment will be needed, funded by improved government tax collection with stronger institutions to support investment and FDI. On the positive side, Guatemala still has growth upsides from urbanisation and nearshoring trends, and a long track record of conservative fiscal policy and central bank independence reduces macro risk. The second round of the Presidential election will be a litmus test for the anti-corruption agenda, but a victory for anti-corruption candidate, Bernardo Arévalo, would still face the challenges of a fragmented Congress and tackling the so-called “corrupt pact” of vested interests between political, judicial and business sectors.
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