Is economic growth reflected in the well-being of the population? Several analysts claim that this is not the case

Representatives of different economic research centers consulted by Free Press To offer their positions on the indicator, they recognize that it is positive for Guatemala, but it does not necessarily mean the solution of the economic and social problems that the country is going through, and above all, the consequences left by the health crisis.

On the contrary, they assure that the figure should be seen “to see it coldly” and that it is time to define a strategy so that the growth of the gross domestic product (GDP) is sustainable for the benefit of the majority of the population and close the inequality gaps .

In the session last Wednesday, the members of the Monetary Board (JM), learned about the economic evaluation report, according to which, the 17 productive sectors had positive performance, with an estimate of growth much higher than 2020 that was -1.5 %.

“Rebound effect”

The main coincidence of those consulted is that the rise in the economy is due to a “rebound effect”. That is, after registering a drop in production, this year there was a recovery, so it must be viewed with caution, since by 2022 there will be a decrease.

David Casasola, an analyst at the National Economic Research Center (Cien), and Pedro Prado, from the Association for Research and Social Studies (Asíes), stated that the sustainability of growth should be examined.

The important thing is to see how the recovery is linear and the challenges are so that in the following years, growth of that level is chained, “but there comes the complicated thing because it is not the same to grow 7% coming from -1.5 % to chain several years at a rate of 7% “, declared Casasola.

Prado said that the indicator responds to an increase in the world recovery, including the demand for goods and services, imports, exports, apart from the extraordinary growth of remittances sent by Guatemalan migrants, resources that boost spending.

Inequality persists

Casasola stated that the result for 2021 is a macroeconomic indicator that does not denote the impact on the economic development of the majority of the Guatemalan population.

“It has not necessarily been evidenced that when there is historical growth, it means that structural problems have been resolved to ensure a better quality of life for Guatemalans in matters of education, health, among others,” said the representative of Cien.

Prado warned that the risk of the new variants of the coronavirus remains and much will depend on the management at the national level, since the strategies to attend and strengthen the most affected conglomerates such as homes and micro, small and medium-sized enterprises (MSMEs ).

This, in matters that demand a lot of attention, taking into account social indicators such as poverty, food and nutritional security, as well as the recovery of family income, since it is necessary that the economic recovery be reflected in the development and well-being of the population.

He cited as an example that, within the business community, MSMEs need a lot of support to get ahead, since as a whole they generate thousands of jobs. “The economic growth rate of 2021 constitutes an environment conducive to consolidating the sustainability of the recovery and addressing the need to strengthen support from public policies for MSMEs, improve the well-being of Guatemalans and reduce the flow of migrants. ”, Considered the analyst of Asies.

Not reflected for most

The reading of Jonathan Menkos, a researcher at the Central American Institute for Fiscal Studies (Icefi), is that this behavior is the result of the process of return to growth, after a very bad 2020, and factors such as the increase in remittances have boosted the economy and consumption.

However, he warned that the figure is not enough to think that economic growth is turning into greater well-being, since last year alone, 750,000 more people went to live in poverty mainly due to the impact of the pandemic, according to the World Bank .

“In any case, for this economic growth to be converted into greater well-being, there must be the possibility of increasing wages; not only the minimum, but the real average of the workers; when there is more productive dynamism, it should also be reflected in more collection and this has to become greater well-being, population development with better public services, access to health, education, fight against malnutrition and against extreme poverty ”, Menkos pointed out. .

In addition, transform these resources into support for employment formalization programs so that productive MSMEs can access services in a less costly way, have fewer procedures and generate more employment. In the opinion of the director of Icefi “there seems to be no coherence between the data on the economy and the real conditions of Guatemalans.”

“There are two ways to transform economic growth into the well-being of the population: the labor market through improvements in wages and through fiscal policy, to create goods and services aimed at greater well-being, but in the country it is not noticed that the government is using economic growth to use these aspects, ”Menkos remarked.

Concrete actions

For Jorge Benavides, researcher at the Foundation for Development (Fundesa), the figure of 7.5% for economic growth in 2021, after 20 months of pandemic, is a sign that the economy has managed to recover and that there are very concrete actions that are helping the country move towards sustainable growth.

He stated that it is not accidental -the result- because there have been actions that support it, such as the reforms to the Free Zones Law and its regulations, the Leasing Law, the Law for the Simplification of Administrative Procedures and the application of Convention 175 of the ILO (for part-time employment contracts).

On the other hand, he mentioned the mechanism for the refund of the value added tax (VAT) to exporters, simplification of procedures for issuing licenses and health records, the study of customs clearance times and the drafting of new procedures to modify criteria. Also the streamlining of customs processes and the application of the reasonable doubt procedure for exports.

Other actions that have been taken and that will have a positive effect, according to him, is to boost regional minimum wages that could be implemented in 2023.

In addition, for the other year, resources for Q100 million were approved for scholarship programs, of which 90% will be used for English; and the support program for SMEs (for which there are Q400 million).

He also highlighted the unification of customs with Honduras (and soon with El Salvador), the Free Trade Agreement with South Korea, the agile construction window, the visa program for temporary jobs in the United States and Canada, and the approval of the public-private alliance for the Escuintla-Puerto Quetzal Highway.

When asked about the need to reflect economic growth in social development, the Fundesa analyst assured that the best sign of this growth is that it has increased tax collection and has allowed the Ministry of Finance to have an unprecedented cash balance to start the next year.

“If there is good planning and expeditious execution, public investment in infrastructure, health, education and security will be the easiest way to transfer the fruits of growth to improving the quality of Guatemalans. This, without detracting from the direct impact it has had on the recovery, jobs and sales of small and medium-sized companies that have been able to adapt to the demands of a different world ”, concluded Benavides.

External factors

Paul Boteo, executive director of the Fundación Libertad y Desarrollo, commented that in 2021 a phenomenon was observed, which economists call an increase in aggregate demand, and a result of gigantic growth was observed in the United States, as a result of the stimuli. monetary and fiscal measures that occurred in that country to attend to the health emergency, to which Guatemala became “hooked” in that growth in two ways.

“The first was on the side of foreign exchange income from family remittances, with growth of over 35% in the year, which is a historical fact because in the last 20 years there has not been such a high growth. And that provides purchasing power to a sector of the population, which is spending it and causes a growth in aggregate demand ”.

The other channel that reflects this situation in the United States is the increase in exports, since it has been a good year for different productive sectors for two reasons: the first is because there is a demand and because of the improvement in the prices of raw materials.

“It is not that we are improving in terms of productivity or that it is simply due to the effects of external demand. In this sense, it is a temporary phenomenon and does not imply that these growth rates will continue from now on. To the extent that the effects in the United States begin to disappear, this will also happen here, if something important is not done to improve productivity, which is the key factor for long-term growth, “he said.

Social investment and infrastructure

José Andrés Ardón, executive director of the Institute for Economic Competitiveness (ICE) explained that it is necessary that there be public policies that promote innovation and competition.

A more competitive country will allow citizens to enjoy higher income either in their jobs or in entrepreneurship, and in that sense, it is necessary for the government to invest in projects that have a direct impact on the quality of life of citizens, such as education. , health and greater infrastructure.

“To take advantage of the resilience that the country has shown in economic terms, it is necessary to continue with economic activation measures that are still pending, such as increasing investment in road infrastructure, resuming face-to-face education, creating the conditions for greater competition and improving the quality of public spending. This increase in GDP would also mean a greater availability of resources by the State, as has been seen in the rise in public collection throughout the year “, he concluded.

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