Banking Industry Country Risk Assessment: Guatemala

Despite structural and inherent economic challenges, we believe the Guatemalan banking system's credit is expanding. We forecast credit to grow about 9% in 2023 and 8% in 2024-2025. Additionally, we expect past-due loans and credit losses to be stable and manageable, with both metrics below 3% for the same period, while profitability remains resilient and above historical levels. Our economic risk trend for banks operating in Guatemala remains stable. We expect the banking sector to keep expanding its credit portfolio at about 8% in 2024-2025. We believe larger credit expansion will remain limited by the country's low GDP growth prospects, reflecting the inherent economic weaknesses such as high poverty and inequality. On the other hand, we expect asset quality to

...Guatemala's economic growth and its banking system's performance have been resilient despite political challenges. We expect Guatemala's real GDP to grow 3.0% in 2023 and 3.5% in 2024 and 2025, supported by external demand, pro-investment economic policies, and still strong remittances, which will continue to drive household consumption and consequently credit demand. We think GDP per capita will slightly recover in the next three years, but it will remain restrained by many years of low investment, shortfalls in social services, political gridlock, and weak competition....

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