UN DESA | DPAD | Development Policy Analysis Division
Capacity Development and Advisory Services
Macroeconomic policy, external shocks and social protection
Guatemala must be ready to react to external conditions
Simulations show that, following a 50% drop in the international prices for Guatemala’s main exports, the economy suffers a large drop in GDP that affects the sectors that use lower skilled labor, which comprises a majority of the population. This is the group most economically vulnerable and nearer the poverty line. As such, the simulated shock resulted in a higher unemployment rate and lower average wage income, resulting in higher poverty rates and income inequality.
A fall in exports prices has a large effect on poverty rates since it impacts lower skilled workers
Social policies are effective, but carry a large cost
Social policy simulations show that they are effective in reducing the impact of external shocks, albeit with a significant fiscal cost. Education-related transfer programs would lower poverty rates by 3.1 percentage points, while pension-related policies lower poverty rates by 1.8 percentage points. The most effective policies are those that directly transfer to families. As a response to the simulated external shocks, the policies with the largest mitigating effect are education-related transfers and transfers to senior citizens. Both can have a large mitigating effect on poverty rates against a hypothetical drop in export prices.