IMF国际货币组织全球-Guatemala_2019-Article-IV-Consultation_67页_2mb

IMF 2019 Article IV Consultation with Guatemala Summary

Core Content

The 2019 Article IV consultation with Guatemala by the International Monetary Fund (IMF) highlighted the country's strong macroeconomic fundamentals and the revival of growth since mid-2018. The consultation emphasized the importance of fiscal and monetary policies in supporting demand and promoting inclusive growth, while also addressing long-standing challenges in business climate reforms, financial inclusion, and anti-corruption efforts.

Main Points

Economic Fundamentals and Growth Outlook

• Macroeconomic Fundamentals: Strong macroeconomic framework with moderate fiscal deficit (around 1.8% of GDP in 2018), low inflation (3.1% in 2018), and a solid external position driven by strong remittances.
• Growth Revival: Growth has improved since 2018, supported by remittances, private consumption, and a positive fiscal impulse.
• Growth Projections:
  • Near-term growth is expected to rebound, reaching 3.7% in 2021.
  • By 2024, growth is projected to converge to its potential rate of 3.5%.
• Inflation Outlook: Inflation is expected to remain within the target band of 4% ± 1%, with the midpoint likely to be reached by 2021 as spare capacity narrows.

Fiscal Policy

• Fiscal Support: Fiscal policy is expansionary, with the deficit widening to 2.4% of GDP in 2020, supporting a cumulative fiscal impulse of 0.6% of GDP over 2019–2020.
• Fiscal Priorities:
  • Sustain budgetary execution momentum.
  • Reverse the decline in tax revenues.
  • Improve spending efficiency to expand fiscal space for infrastructure and social spending.
• Tax Reform: A comprehensive tax reform is recommended to finance planned spending and address the tax gap.

Monetary Policy

• Monetary Accommodation: Monetary policy remains accommodative in the near term to support the economy as it moves toward potential growth.
• Gradual Normalization: Normalization should be gradual and data-dependent, with improvements in FX flexibility and liquidity management.

Business Climate and Governance

• Reforms Needed: Business climate and public sector reforms are essential to promote private investment and meet SDG targets.
• Key Initiatives:
  • Strengthen contract enforcement and regulatory framework.
  • Expedite the implementation of the PPP framework and the road infrastructure bill.
  • Improve customs procedures with El Salvador and Mexico to enhance export potential.

Financial Sector Modernization and Inclusion

• Basel III Standards: Continued adoption of Basel III standards and reinforcement of the bank resolution framework.
• AML/CFT Framework: Strengthening the anti-money laundering and counter-terrorism financing (AML/CFT) framework to enhance financial integrity.
• Financial Inclusion: Operationalizing financial inclusion initiatives and promoting Fintech solutions under the National Strategy for Financial Inclusion.

Risks to Outlook

• External Risks: Growth slowdown in the U.S. and regional partners could negatively impact the economy.
• Domestic Risks: Lagged implementation of business reforms and anti-corruption efforts may hinder investment.
• Tail Risks: An increase in the return of migrants from the U.S. poses a serious, albeit low-probability, risk.

Public Finances

• Central Government Deficit: Increased to 1.8% of GDP in 2018 from 1.3% in 2017.
• Debt Levels: Public debt ratio at 25% of GDP, with external debt at 10.6% of GDP.
• Fiscal Space: Limited due to low revenue base and high debt service ratio.

Key Recommendations

• Fiscal Policy: Focus on reversing the decline in tax revenues and improving spending efficiency.
• Monetary Policy: Maintain accommodative stance until the growth upswing solidifies and proceed with gradual normalization.
• Business Climate Reforms: Implement long-delayed reforms to foster a conducive environment for private investment.
• Financial Inclusion: Promote Fintech and simplify financial services to increase access.
• Anti-Corruption: Strengthen the Attorney General's Office and judicial capacities, improve procurement and tax exemption transparency.

Key Information

• Fiscal Deficit: 1.8% of GDP in 2018, projected to widen to 2.4% in 2020.
• Public Debt: 25% of GDP in 2018, expected to increase to 26% by 2020.
• GDP Growth: Revived to 3.1% in 2018, projected to peak at 3.7% in 2021.
• Inflation: 2.3% in 2018, expected to rise to 4.75% in 2019, converging to the midpoint of the target band by 2021.
• Current Account Balance: Expected to deteriorate to -1.5% of GDP by 2024, with a CA norm estimated at -2.2% of GDP.
• Tax Revenues: Declined by around 0.5 percentage points from 2016–2018, with a need to reverse this trend.

Conclusion

The IMF Executive Board endorsed the staff appraisal, highlighting the importance of maintaining macroeconomic stability, supporting demand, and advancing structural reforms. The focus is on improving fiscal and monetary policies, fostering a business-friendly environment, and enhancing financial inclusion and anti-corruption measures to achieve sustainable growth and meet the SDGs.