Guatemala is preparing to receive a inflationary blow as a result of the increase in the international price of a barrel of oil, which has not decreased since the end of February, and the approved subsidy fails to stop the possible impact on homes and consumers’ pockets.
After 10 weeks since the international geopolitical crisis began in the Middle East, the Monetary Board (JM) adjusted upward the inflation projection for the end of 2026, which went from 3.50% to 3.75%, and projects 4% for 2027. Analysts consulted by Free press They assure that the new projection is conservative.
This is a first official review, but uncertainty persists due to the changing environment on a global scale, which generates expectations in economic agents for their investment decisions, expansion or actions at a macroeconomic level.
At the microeconomic level there will also be repercussions on the general price level, as well as the so-called second round effects in the economic scenarios of 2026 and 2027. Furthermore, this will put technical-political pressure to establish the new minimum wage table for next year.
Rising oil pressures household spending
Sergio Recinos, former president of the Bank of Guatemala (Banguat), declared to Free press that there will be an inflationary problem derived from this international conflict, which will cause an increase in the price of oil, propane gas, as well as other inputs, such as fertilizers, which would begin to be reflected in the economy in the second half of this year and 2027, explaining the impact on consumers and households in Guatemala.
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As happened in March, when the inflation rate increased to 2.50%, which represented one percentage point more than February, the former official anticipated that the greatest impact would be seen in April and in the following months, if this international turbulence is not “stopped.”
He clarified that, even if the war conflict is resolved, the effects will not be immediate and that the price of crude oil—which is used for the refining of products such as diesel, gasoline and propane, among others—would not return to the levels observed before the conflict.
This, translated into inflation for Guatemala, implies that the central bank has already made an upward revision: “obviously raising its forecasts (to 3.75%) and I think they were still a little short, because it could be more, so the optimistic scenario is already out and we are entering an intermediate scenario.”
Recinos recalled the experience of 2022 —when there was also an escalation in international prices due to the Russia-Ukraine conflict—, as well as the delays of the pandemic, and pointed out that Inflation skyrocketed above 9%.
“It will not be such a high inflation – now – but 3.5% will be a little short and could be above 4%. This affects the pockets of the entire population, especially people who are subject to fixed incomes, who are the most impacted,” he indicated.
Subsidy does not stop impact on homes
For economist Maynor Cabrera, from the Economics for Development Foundation (Fedes), it is evident that the greatest impact will be on energy products in homes. Although there is a subsidy in force—Q8 for a gallon of diesel and Q5 for gasoline—the real impact on the final consumer and the costs for companies is still unclear, since, in his opinion, “it could have been much better, in a market structure that may have some collusion, so to speak,” he declared.
“It will not be such a high inflation – now – but 3.5% will be a little short and could be above 4%. This affects the pockets of the entire population, especially people who are subject to fixed incomes, who are the most impacted.”
Sergio Recinos, former president of Banguat
On the other hand, he explained that over time there will be indirect effects that will be observed gradually. In addition, he indicated that there are other factors, such as weather, that can also influence prices, especially in the basic food basket and in some export goods of agricultural origin.
Fuel hike impacts the CPI
Hugo Maul, analyst at the National Economic Research Center (Cien), maintains that, from the perspective of the structure of the Consumer Price Index (CPI), there is a direct impact of the increase in fuel prices on the general price level, depending on the weights they have in the different items of the expenditure divisions.
He explained that, in the transportation category within the CPI basket, fuels represent close to 8%, which means that any variation—downward or upward—is automatically multiplied by that percentage, “and there it does impact the proportion of their relative weight.”
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On the other hand, he mentioned that spending on fuels within homes, such as propane or kerosene, represents another 3%, pSo when adding both components we reach 11%.
“If we talk about an impact effect, the entire price of oil has a direct translation of these fuels to the CPI,” he pointed out.
The CPI measurement is done every ten days (decades), and the Sampling for its construction reaches close to 100 thousand observations on a national scale, so the relative change with respect to the same previous period is calculated.
The Cien analyst asserted that, during last March, in two periods of decades, the effect of the rise in the price of oil “was bitten”; Now, in the April report, the complete series is captured, so the effect of the price adjustment will be observed in the other spending divisions.
Then, once that adjustment is made, there will be no reason for inflation to continue rising based on increases in oil prices: “it would already be a grade effect and not a slope change effect,” he asserted.
He exemplified that, compared to Honduras, the main concern about the rise in fuel prices is its impact on the price of electricity, which has not been a problem in Guatemala.
Inflation pressures increase in the minimum wage
Given the rise in observed and expected inflation, the joint commissions, representing the worker, employer and Government sectors, began the discussion to establish the new salary schedule for 2027. Inflation is a factor that must be analyzed to define what decision the National Salary Commission adopts in the second semester, in the scenario that an agreement is reached in that instance.
The Cien analyst explained that, in conversations he has had with representatives of some companies, they have expressed that they have supported the adjustments by presidential decree during the current administration, through the application of efficiencies, savings and adjustments in employability; However, when adding energy costs, Margins are reduced to avoid price shifting.
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In this regard, he considered that there is a relationship between the increase in the general cost of companies through salaries, especially in those that are intensive in hiring labor, and now with the increase in energy costs.
The most worrying thing, he emphasized, is that, if inflation exceeds 5%, in the next review of the minimum wage it is intended to make this transfer, and “we would be in a quite serious situation.”