Growth in Central America’s biggest economy will accelerate to 4.5 percent next year as infrastructure projects start up and spending increases ahead of presidential elections, Guatemala Economy Minister Sergio de la Torre said.
Guatemala’s 2015 budget, due to be submitted next week, will rise to 70 billion quetzales ($9 billion) from about 69 billion quetzales this year and will include a fiscal deficit of as much as 2.5 percent of gross domestic product, de la Torre said in an interview in his Guatemala City office yesterday. Remittances are also surging as Guatemalans abroad benefit from the improving U.S. economy and send more cash back home, he said.
“We have a robust economy,” according to de la Torre, 51, who forecasts growth of 4 percent this year. “There is a lot of investment in electricity, mining and in the manufacturing and infrastructure industries.”
New projects, including a $900 million power plant built by Ashmore Energy International Ltd, will help the economy overcome the impact of a drought that prompted President Otto Perez Molina to declare a state of emergency this month. Perez Molina said 1.2 million Guatemalans were at risk of food shortages from the drought.
The drought will prompt more families to leave Guatemala and attempt to migrate to the U.S., which has struggled with a surge in unaccompanied Central American children trying to enter the country this year, de la Torre said.
“I have absolutely no doubt that it’s going to happen,” De La Torre said. “What these families are going to face is what they are already facing, a terrible problem of hunger and shortage.”
The annual forecast for the country’s coffee crops, which represent 6 percent of exports, was cut 3 percent this month to 3.37 million bags as a result of the drought. Guatemala is the top coffee producer in Central America after Honduras.
Remittances, which account for more than 10 percent of Guatemala’s GDP, have climbed as the U.S. economy improves, the minister said. Remittances rose 14 percent to about $450 million in July, according to the central bank.
The International Monetary Fund last month praised the country’s economic outlook, citing “prudent macroeconomic policies” and “relatively low inflation” that slowed to 3.4 percent in July from 4.7 percent a year earlier. Like many emerging markets, the country’s economy could be hit by a decision to raise interest rates in the U.S. or worsening conditions in Europe, the IMF said.
De la Torre, who has a clothing company, said he once had a black hat made for previous Economy Minister Pavel Centeno. That hat said “No hay,” which means “There isn’t any” in Spanish, because whenever other ministers would ask him for money he would always say “no hay!”
Without saying whether the country will sell dollar bonds to finance next year’s budget, de la Torre called the expected fiscal deficit next year “very responsible, one of the lowest in Latin America.”
Guatemala’s dollar bonds have returned 13 percent this year, more than the 10 percent for emerging markets, according to JPMorgan Chase & Co.’s EMBIG index.
“We see very positive momentum for the economy in 2015,” de la Torre said.