International Monetary Fund data from 2017 reveals that Guatemala is the 73rd-largest economy based on nominal gross domestic product (GDP), which evaluates market prices, and 77th-largest economy based on purchasing power parity (PPP), which compares the prices of like consumer goods among countries.
With a population of around 95 million, the Guatemala ranks 132nd in the world based on nominal GDP per capita and 125th based on GDP by PPP per capita. These measures divide nominal GDP and GDP by PPP by the country’s population.
What should I know about nominal GDP and PPP?Among the multiple ways that economists measure a country’s economic strength, nominal GDP and PPP are two of the most common.
Nominal GDP is based on official government estimates and depends on exchange rates between two countries, typically using the US dollar for one of the denominations. It’s useful for measuring financial flows between countries. But because it doesn’t consider differences in cost of living, it can distort per capita income estimates.
PPP, on the other hand, considers the relative cost of local goods, services and inflation rates — all factors considered to reflect a country’s domestic market. Because PPP compares the costs of a common “basket of goods” — some 3,000 consumer goods that include food, fuel and insurance — it’s considered a more ideal way to project per capita income projections and gauge poverty thresholds.
Guatemala’ official currency is the Guatemalan quetzal (GTQ). This currency has recently fluctuated between 7 and 7.5 GTQ against the US dollar.
The services sector accounted for 62.7% of GDP in 2015. Around 50% of men and 32% of women are self-employed. Plagued by a civil war that raged for decades, ending only in the mid-1990s, Guatemala’s tourism industry has boomed in recent years.
Industry accounted for around 24% of GDP in 2015. Textiles and clothing, furniture, chemicals, petroleum and metals are major industries.
Agriculture accounted for around 14% of GDP in 2015. Guatemala is the world’s largest producer and exporter of cardamom. It is a longtime major exporter of sugar, bananas and coffee, with recent increases in exports of winter vegetables, fruits and cut flowers.
Remittances from Guatemalans abroad to families back home is estimated to make up nearly two-thirds of the country’s exports.
As of 2012, an estimated 2.9% of the population was unemployed.
Major contributors to the economy
Guatemala is a signatory to the Dominican Republic–Central American Free Trade Agreement. US companies have increased investments in Guatemala’s export sector as a result.
The country also benefits from the US Generalized System of Preferences and the US Caribbean Basin Trade and Partnership Act, which grant preferential tariffs to US trading partners among Caribbean Basin countries.
Guatemala’s top trading partners include the US and neighboring countries El Salvador and Guatemala. The US accounts for more than 50% of the country’s foreign trade.
The country’s top exports include:
- Fruits and nuts
- Knit or crochet clothing
- Coffee, tea and spices
- Ores, slag and ash
Its major imports include:
- Petroleum oils
- Machinery, nuclear reactors and boilers
- Electrical and electronic equipment
Guatemala is Central America’s biggest economy and among Latin America’s top-performing economies from 2015 to 2017.
However, inequality and poverty rates, particularly in rural and indigenous areas, remain high. The government made substantial progress in the fight against poverty in the 2000s, but poverty levels rose again in the last decade. High malnutrition and maternal and child mortality rates compound Guatemala’s woes.
Despite its structural problems, Guatemala’s strong economic fundamentals bode well for the country’s outlook. The government plans to continue reforms designed to accelerate economic growth, boost public spending and mobilize investment from the private sector. To avoid crime and violence straining the economy, it must also focus on improving peace and order around the country.