In April 2021 the IMF issued a concluding statement following a consultation with Guatemala under Article IV of the IMF’s articles of agreement.

Suspension of non-essential activities contained the impact of the pandemic in its early stages and the economic recovery was facilitated by a prompt reopening and measures to limit infections. Guatamala’s economy specialises in agriculture and other supplies that were essential in the pandemic and as a result the GDP contracted by only 1.5% in 2020.

The IMF is estimating that growth in 2021 will reach 4.5% as the economic recovery is led by agriculture, wholesale commerce and manufacturing. Owing to the strong trade links and remittances from the US the economy is likely to benefit from the American Rescue Plan. Downside risks come from possible virus mutations, problems with vaccine acquisition and distribution and any need for further containment measures.

Government spending should aim at increasing cash transfers for health, nutrition, and education following the deterioration of social indicators during 2020. An increase in public investment is also required. The provision of cash transfers should be targeted digitally, and education could be provided through both virtual and in-person learning, to prevent further losses in human capital.

Further revenue mobilization is needed to finance the additional spending required. The IMF report welcomes the management continuity at the tax agency and the measures to improve voluntary compliance by measures such as the dispute resolution mechanism. The IMF report recommends further strengthening of tax administrative enforcement, medium and large taxpayers’ compliance and customs’ controls. Tax exemptions should be rationalised and priority should be given to introducing automatic revenue administration processes.

The government should step up reforms to improve the business climate, encouraging investment, creating employment opportunities and reducing poverty. The IMF report welcomes the government’s emphasis on digitalization to reduce bureaucracy and corruption. Efforts to engage with foreign investors and draw up a large-scale investment program could lead to improvements especially if there are upgrades to infrastructure. Measures should be introduced to provide legal certainty to investors, to facilitate part-time employment and improve insolvency procedures for business.