Macroeconomic Forecast Guatemala

With inflation remaining above Banguat's 7.0% upper limit, at 9.1% in March, a sense of panic is setting in, beginning with the government's proposal to use public funds to stem higher food prices. The central bank is doing its part, by increasing the main monetary policy rate by 25bps on March 27 to 6.75%. Suddenly, Guatemalan rates are not far from those of neighbouring Mexico, and monetary policy could get tighter. Against this deteriorating backdrop, the government lowered its year-end GDP forecast to 4.8% (from 5.3%) - a move we agree with, as evidenced by our 5.0% forecast.

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