Fitch Ratings raised its ranking for Guatemala from BB- to BB with a stable outlook, in an upgrade that shows very strong fiscal and economic healing, and a more enhancement in external metrics, following the pandemic and international cost shocks.
The score company estimated that Gross Domestic Product (GDP) grew by 4.0% in 2022 after a strong healing of 8.0% in 2021 and a small contraction of 1.8% in 2020.
This represents one of the greatest healings among score and local peers and has been attained without massive policy support and in spite of an unfavorable terms-of-trade shock in the previous year.Fitch Ratings raised its ranking for Guatemala from BB- to BB (Photo internet reproduction)Increased remittance inflows, strong credit, and robust exports drove strong performance.While Fitch sees these factors continuing to drive GDP this year, it anticipates economic activity to moderate by 3.3% due to a downturn in worldwide growth.Inflation rose to 9.7% y-o-y in January, driven by fuel and food prices.The Central Bank (Banguat) has responded by raising its policy rate by 250 basis points to 4.25% from early 2022, representing an accommodative monetary policy position in contrast to most regional peers.Fitch jobs inflation to start moderating in mid-2023 and reach 5.5% by year-end, as the imported component falls amidst continued tightening up international monetary conditions and slowing global growth.According to the report, the ratings stay constrained by exceptionally low governance ratings, which have deteriorated further over the last few years, and low human advancement indicators.The administration has had the ability to overcome congressional gridlock to pass reforms and budgets.However, this could stay an obstacle under the next federal government after the June 25, 2023 elections, provided a highly fragmented political landscape, according to the ranking firm.
corruption.The central federal government (CG) fiscal deficit deteriorated a little from 1.2% of GDP in 2021 to 1.7% in 2022, as enhanced profits were offset by higher spending due to procedures to address cost-of-living pressures.
Fitch expects the CG deficit to increase reasonably to 2.0% in 2023.
With info from Bloomberg