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- GDP (PPP):
- $125.9 billion
- 4.0% growth
- 3.8% 5-year compound annual growth
- $7,738 per capita
- Inflation (CPI):
- FDI Inflow:
Policy failures and structural inadequacies continue to hinder broad-based economic growth in Guatemala. The government’s fiscal deficits remain contained, but efforts to improve management of public finance and government effectiveness have had little impact, and the inefficient public sector continues to undermine private-sector development. More than half of the population lives below the national poverty line, and almost 40 percent of the indigenous population lives in extreme poverty.
Long-standing constraints on Guatemala’s economic freedom include widespread government corruption and fragile protection of property rights under the weak rule of law. Lack of access to long-term financing is a significant impediment to business development and job growth.
Guatemala won its independence from Spain in 1821. A long guerrilla war that left more than 200,000 dead and led to the out-migration of about a million Guatemalans ended with a peace agreement in 1996. Since then, Guatemala has pursued important reforms and macroeconomic stabilization and has attracted foreign investment. Instability spiked anew when the rightist Patriotic Party government collapsed in November 2015. The new president, political neophyte Jimmy Morales, began his five-year term in early 2016 but has made little progress on promised improvements in health care, education, and security. Guatemala remains a major drug trafficking transit country. Gang violence continues to impede economic development.
Although the government has stepped up efforts to enforce property rights, it can be difficult to obtain and enforce eviction notices when rightful ownership is in dispute. The judiciary is hobbled by corruption, inefficiency, insufficient capacity, and the intimidation of judges and prosecutors. Widespread corruption and mismanagement remain problems, especially in the customs and tax agencies.
The top individual income and corporate tax rates are 31 percent. Other taxes include a value-added tax and a tax on real estate. The overall tax burden equals 12.5 percent of total domestic income. Government spending has amounted to 13.1 percent of total output (GDP) over the past three years, and budget deficits have averaged 1.8 percent of GDP. Public debt is equivalent to 24.3 percent of GDP.
Bureaucratic hurdles, including lengthy processes for launching a business and obtaining necessary permits, remain common. Outmoded labor regulations are rigid. A large portion of the workforce is employed in the informal sector. The state maintains few price controls but subsidizes public transport in Guatemala City, diesel fuel for trucks and buses, and electricity for low-income families.
Trade is important to Guatemala’s economy; the value of exports and imports taken together equals 51 percent of GDP. The average applied tariff rate is 1.5 percent. Foreign and domestic investors are generally treated equally under the law, but the judicial and regulatory systems may discourage investment. The small financial system is dominated by bank-centered financial conglomerates. The foreign bank presence is small.