The national economic situation causes uncertainty among entrepreneurs, who are not sure of investing

In October, the Index of Confidence in Economic Activity (Icae), stood at 45.33 points, according to the report published by the Bank of Guatemala (Banguat), indicating that, from August to October, the indicator remained below of the expansion zone.

The Icae survey aims to measure the perception of confidence of economic agents in the business and investment climate in the country and when it exceeds 50 points, there is an improvement in such appreciation, but when it is lower, it reflects a level of indecision or uncertainty that affects future investments and, consequently, employment.

For example, in August the position was 46.09 points; in September, 49.58 points; and in October, 45.33 points. The highest reported in this period occurred in January of this year, when it was 80.12 points. The central bank’s questions are answered by a panel of analysts who are consulted on a monthly basis.

Concrete results

The report details that seven out of 10 respondents consider that the business climate for private sector activities will remain the same in the next six months, while 15 responded that it will improve and another 15 percent said that it will worsen.

Similarly, 70% consider that the economy is not better than a year ago and 30% said it is. When asked if they expect an improvement in the economic evolution of the country in the following six months, 73.7% said no and 26.3% answered yes.

Finally, 80% stated that the current situation of companies in the country is not safe to make investments; 10% of those surveyed responded that it is a good time to invest and an equal percentage said no.

Influencing factors

Fernando Estrada Domínguez, director of the Statistics Commission of the Guatemalan Chamber of Construction (CGC), stated that there are at least three aspects that are influencing decision makers and that could explain the result of Icae last October.

The first is associated with the fact that people “believe” and it is not that there is going to be an economic recession in the United States, due to the handling of the interest rate by the Federal Reserve (Fed), because if Americans “like he gets the flu, his neighbors get pneumonia.”

This is the main concern because it is considered that due to the increase in Fed rates to control inflation in the United States, which is above 8 percent, many businessmen have doubts about the impacts or that money becomes more expensive. ”, remarked the director.

Although he clarified that there is no direct correlation between the rates of the Fed and those of the Guatemalan market, “but that does not mean that decision makers are not scared.”

It would also be influencing the behavior of the price of diesel, which is the main fuel used for the movement of people and goods, and despite the fact that, in the international market, the barrel of oil has fallen, this fuel does not and does not there is enough supply, so the increase in prices continues.

Diesel impacts public transport, freight, machinery and “it is not seen that it will go down soon” now that winter is about to enter the northern hemisphere, Estrada stressed.

Finally, the issue of political uncertainty is also influencing “because they don’t know who the actors are.” However, he clarified that there is macroeconomic stability and that income from family remittances will continue to grow, but due to other factors, people have lost confidence in the last month.

Last Tuesday, November 8, during the conversation “Economy on Alert: should we prepare for a recession in 2023?”, organized by Free Press, Álvaro González Ricci, president of Banguat, assured that there will be no recession in Guatemala and that for this year the economy is projected to close at 4%, which, in the world environment, is a good result; while for 2023, the growth expectation is 3.5%.

mix of circumstances

For the independent internationalist Roberto Santiago Servent, the fall to 45 points of the Icae last October is also due to several factors that impacted both macroeconomically and microeconomically, and part of the unstable variations and high fluctuation of oil derivatives.

In addition to the behavior of the exchange rate that in October registered an appreciation against the dollar, which also influenced the cost of the Basic Food Basket, while the performance of inflation continues to rise (9.7% in the indicated month).

“The anticipated political promotion of some candidates and parties is also a matter of concern, together with the dubious and preferential actions of the magistrates of the Supreme Electoral Tribunal, in the face of the 2023 elections, which is creating a state of alarm among the population and investors”.