Remittances rose to a record-high USD 1,592.5 million in May, with annual growth accelerating to 28.8% year on year in the month (April: +23.1% yoy). Furthermore, on a 12-month rolling basis, remittances increased 28.5% year on year in May, down from April’s 29.7% rise.
Remittances, which are a key source of income for families in Guatemala, tend to follow labor market trends in the United States, where the majority of remittances originate from. The U.S. economy is expected to continue supporting remittances and household spending in Guatemala. However, economic growth is set to ease in the U.S., which could weigh on inflows and thus private consumption. The war in Ukraine adds a further downside risk.
Analysts at the EIU commented:
“We expect faster GDP growth in the near term as the economy reopens and Guatemalans continue to receive huge inflows of workers’ remittances, mainly from the US, where job conditions are strong.”
FocusEconomics Consensus Forecast participants see private consumption expanding 5.2% in 2022, which is down 0.1 percentage pointsdo from last month, and increasing 3.4% in 2023.