S&P Sees Guatemala GDP Slowdown

S&P expects Guatemala GDP growth to slow towards 4.0% in 2008, mainly because of adverse external conditions. The country’s real GDP grew 5.7% in 2007, according to the IMF. “High commodities prices and inflation as well as the expected slowdown in the US economy, which will affect the pace of growth of workers remittances, are among the main negative shocks that the Guatemalan economy will face in 2008,” says the agency. S&P affirms its BB/B foreign currency and BB+/B local currency sovereign credit ratings on Guatemala. The outlook remains positive. “Guatemala’s ratings are supported by a strong track record of cautious fiscal policies, an improving government debt profile, and a steady flow of workers remittances,” adds the agency. However, fiscal flexibility and creditworthiness will continue to be constrained over the medium term by a narrow tax base and continual current account deficits that hinder an otherwise sound macroeconomic framework, says S&P.