Guatemala remittances on track for new annual record

Annual remittances to Guatemala are on track to break the US$11bn-mark for the first time ever this year with the improving US labor market and pandemic-induced hardship at home driving the surge.

Remittances in November amounted to US$983mn, according to the central bank, as cumulative transfers from January to November climbed to US$10.2bn – a 6.4% increase over the same 11-month period in 2019. 

“The growth in the sending of remittances is due to improvement in Latino employment in the US,” local daily Diario de Centro América reported central bank president Sergio Recinos as saying.

The transfers also tend to jump during the holiday season in December, and according to Recinos, roughly US$1mn in remittances are expected to arrive this month, pushing the year-end estimate to US$11.2bn, surpassing the former all-time high set in 2019 by about US$700mn.

Tough economic conditions in the Central American country have been another factor behind the growth in remittances, with Guatemala's IMAE monthly economic indicator showing six months in negative territory this year, including the steepest downturn on record in April at -10.5%.

The strong rebound and sustained strength in Guatemala remittances and other nearby nations largely dependent on US remittance outflows have confounded the World Bank prediction made in April that global remittances would decline by about 28% in 2020.

An estimated 3mn Guatemalans live and work in the US, most working illegally and sending money to their families at home. By some estimates 6mn of the 16mn people living in Guatemala are economically dependent on the remittances.

Guatemala is also relatively fortunate in terms of the pandemic’s economic impact, with the IMF expecting GDP to contract only 2.2% this year, the smallest contraction of any country in Central America and far better than the forecast 9% pullback expected for its northern neighbor, Mexico. 

Looking ahead, the IMF sees Guatemala’s GDP expanding 4% in 2021.