Guatemala is the largest economy in Central America in terms of population (estimated at 17.3 million in 2022) and economic activity (gross domestic product -GDP- of US$ 92.7 billion in 2022). The country has experienced stable growth (3.5 percent on average in 2010-19), supported by prudent fiscal and monetary management and an open economy, and had one of the smallest economic declines (-1.8 percent) in the Latin America and Caribbean (LAC) region in 2020 during the COVID-19 pandemic.
The country has returned to above-LAC average economic growth. Guatemala’s GDP grew 4.1 percent in 2022 and 3.5 percent in 2023 and is expected to grow 3 percent in 2024.
However, Guatemala’s solid economic growth has not translated into robust poverty reduction: the country’s poverty and inequality rates are among the highest in LAC, with a large and underserved population, mostly rural and indigenous. Poverty is estimated at 55.1 percent of the population in 2023 and the size of Guatemala’s informal economy is estimated at 49 percent of GDP, with 71.1 percent of the occupied population employed in the informal sector.
A small and ineffective state (with historically low tax revenue and low spending), persistent gaps in access to basic services, limited employment and productive opportunities, and frequent disasters are some of the key factors that have contributed to poverty in Guatemala. All these factors explain the high rates of emigration and the significant dependence of the economy and its households on remittances. In 2022, migrants sent back remittances equivalent to 19 percent of the country's GDP.
Guatemala’s Human Capital Index score of 0.46 (2020) remains far below the LAC average. Human capital indicators are low among Indigenous peoples and Afro descendants. Guatemala’s child malnutrition rate (at 47 percent) is among the ten highest in the world. In several of the poorest municipalities, the share of households with stunted children under five is often close to 90 percent.
Extreme weather events and other disasters have also reversed hard-won gains in human capital, destroyed infrastructure, reduced agricultural output, intensified food insecurity, spread diseases, and disrupted essential services. Recent estimates suggests that the Eta and Iota hurricanes in 2020 caused infrastructure-related losses of close to 0.56 percent of GDP, as well as agriculture-related losses of close to 0.20 percent of GDP.
Guatemala nonetheless has enormous potential to generate growth and prosperity for its entire population. It possesses a civilization spanning culture, is rich in natural resources, and in terms of biodiversity, is one of the world’s megadiverse countries. Its proximity to the United States provides significant tourism and nearshoring opportunities.
President Bernardo Arévalo took office in January 2024 after running on a platform of strong social and economic investment and an anti-corruption stance. The Arévalo administration is committed to increasing the accountability and effectiveness of the public sector, creating better conditions for trade and investment, and advancing reforms to address significant gaps in human development, infrastructure and economic inclusion.
Last Updated: Apr 03, 2024
