Throughout history, states and governments have fallen from positions of growth into stagnation by ignoring the warning signs of their economic indicators. Guatemala, despite its enviable macroeconomic stability over the last 30 years, is not exempt from this risk. This stability is neither a divine gift nor a permanent condition. It has been the result of responsible policies and governments that respected key economic principles, allowing us to withstand global crises as severe as the 2008 financial crisis or the COVID-19 pandemic.
However, some recent economic indicators, along with certain public policies, suggest a risk of economic slowdown for 2025. Therefore, it is crucial to analyze these early warning signs before they become problems that are difficult to reverse.
First Warning Sign: Historically Low Inflation (1.16%)
Inflation, often called a silent tax, erodes purchasing power, especially among the most vulnerable. However, when inflation falls too low, it becomes a sign of slowdown and danger. Year-over-year inflation dropped to 1.16% in October 2024, a historic level because it is the lowest in 14 years, far below the Bank of Guatemala’s target range of 3% to 5%, and because such pronounced disinflation suggests weakening aggregate demand, composed of private consumption, private investment, public spending, and the sum of imports and exports.
The distinction between “historically low inflation” and “disinflation” is crucial: while low inflation may seem positive, if it remains too low it could indicate deflation on the horizon. If not corrected, this could lead to a negative spiral of lower consumption, higher unemployment, and declining investment. The last time Guatemala experienced such low inflation was during the government of Álvaro Colom, as a direct consequence of the 2008 global financial crisis. What is concerning today is that we are not yet facing a global crisis, but rather urgent internal problems.
Second Warning Sign: Productive Sectors in Slowdown
The IMAE, the index that measures the speed of economic activity, shows significant declines in key sectors. Construction has registered negative figures since February, reaching its lowest point in April (-9.8%) and achieving only slight improvements in June (-0.6%). Agriculture, meanwhile, has registered absolute contractions in recent months, fluctuating between -1.7% in February and -1.0% in June. These numbers reflect a clear weakening not seen since the pandemic.
The consequences are evident: less construction does not only mean fewer buildings, but also fewer jobs for thousands of Guatemalans. Likewise, a decline in agriculture affects both rural employment and food prices, directly impacting family budgets. Together, these sectors represent 31.5% of Guatemala’s GDP. This stagnation, along with the poor performance of manufacturing industries and public administration, points to an economy that is losing momentum.
Third Warning Sign: GDP with Concerning Contractions
GDP confirms these trends. Construction experienced declines over the last three quarters (-6.1%, -1.3%, -3.7%), while agriculture registered consecutive setbacks in the last two quarters (-0.7%, -1.0%).
It is time to act, to send a clear message to lawmakers and key officials before falling into a spiral of disillusionment that costs us more years of lost opportunities.
These figures not only reinforce the general weakening, but also show a pattern not seen since the 2008–2009 crisis. If corrective measures are not taken, these contractions could become an obstacle to economic recovery in 2025.
Fourth Warning Sign: Significant Commercial Slowdown
Tax collection from the commercial sector, especially VAT, shows an alarming slowdown. Growth fell from 8.9% between 2022 and 2023 to 5.5% between 2023 and 2024, implying a 40% reduction in revenue growth in that sector. This slowdown not only reflects lower commercial activity, but also directly affects the State’s fiscal capacity. If this situation is not addressed, the impact could spread to other sectors, further aggravating the economic slowdown.
Fifth Warning Sign: Financial System Under Pressure
Financial indicators also present worrying signs. Immediate liquidity has consistently declined from 21% in December 2020 to less than 17% in September 2024, limiting the financing capacity of the private sector. This means less access to credit for families and businesses, reducing both consumption and investment. In addition, the non-performing loan portfolio reached 2.5%, the highest level since the pandemic, while return on equity fell from 24% in January 2023 to 20% in September 2024, indicating a loss of efficiency in the financial system. This deterioration limits the country’s ability to respond to future economic challenges.
Conclusion and outlook
The combination of abrupt disinflation, sectoral contraction, and low liquidity points to a generalized weakening of the economy. These signs, although independent in nature, are deeply interconnected. Contraction in productive sectors affects tax collection, while lower liquidity limits investment capacity to reverse this trend. This vicious circle could lead us into prolonged stagnation if timely measures are not taken. Added to this is an interest rate higher than that of the United States and the risk that the government may increase the budget without a clear execution capacity, which would worsen the fiscal deficit and increase dependence on loans and bonds.
December and the first months of the year, typically periods of lower economic activity, could amplify this impact if the government does not act. Not only is the 2025 economy at stake, but also the future we will leave to the next generations. Ignoring these warnings would mean turning current challenges into structural problems that are even more difficult to resolve.
Guatemala deserves a future of growth and strength, one where the poorest and most vulnerable do not pay the price of inaction. The demographic dividend, that unique window of opportunity in a country’s history, has already suffered nine lost years. But not everything is written. We are still in time to reverse these worrying signs with bold and responsible policies. It is time to act, to send a clear message to lawmakers and key officials before falling into a spiral of disillusionment that costs us more years of lost opportunities.
