Caribbean & Central America - June 2007 (ISSN 1741-4458)

Marí­a Antonieta del Cid de Bonilla, the president of the Banco de Guatemala said that the economy would grow by at least 5.2% this year. 

She argued out that most leading indicators were pointing to a growth rate well above the 5.2% the authorities are forecasting. She said that the increases in cement production, the number of construction permits issued, electricity production, bank credit and the amount of drinks produced all pointed to strong growth. 

Del Cid noted that the jump in interest rates had yet to have an effect on consumption and the demand for credit.

The central bank estimates that the effect of the free trade agreement between Central America and the US (Cafta-DR) will be significant; in 2006, Cafta-DR accounted for 0.24 of a percentage point of the 4.9% growth rate in that year. This year the bank estimates that Cafta-DR will produce 0.67% of the 5.2% forecast for this year. Del Cid noted that in the first four months of 2007 exports were running 26% ahead of the same period of 2006. 

Private sector economists are much less optimistic. They doubt that the economy could escape the effects of the slowdown in the US, the country's biggest export market.

Inflation: In May inflation turned negative: consumer prices fell by 0.27%. In April prices had risen by 0.23%. In the first five months of the year inflation was 2.52%. In the past 12 months inflation was 5.47%, slightly down on the 5.8% recorded in 2006.