Macroeconomic Forecast Guatemala

BMI View: M1 money supply in Guatemala expanded by 9.5% in 2010, slightly more than the 8.0% we had been expecting, but still not enough to stimulate domestic lending, with local currency private sector credit up just 6.7% over the same period. Banks' reluctance to lend is further highlighted by the trend in the money multiplier (M1/monetary base), which stood at 1.5x in February 2011, well off the 1.7x peak hit back in early 2009. Nevertheless, fears about boosting supply-side inflationary pressures imply the central bank will be unwilling to boost local currency money supply significantly over the coming months, in line with our view that M1 growth will be a tepid 8.0% in 2011.

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