Monday, February 2, 2009

Inflation Less than Expected

The panel of economic analysts participating in a survey of inflation expectations put the inflation rate for January at 9.2 percent, a figure lower than forecast for January in the December survey.

The monthly publication by the Bank of Guatemala (Banguat) to measure expectation of inflation showed more optimism about the behavior of inflation in January. That figure fell 1.05 points or 8.77 percent from the previous month's survey.

Analysts project that for the end of 2009 and for 2010 the cost of living reaching 7.72 percent and 7.28 percent respectively. That figure is expected to decline 1.43 points or 10.63 percent for 2009, and 1.46 points or 10.23 percent for 2010. According to the survey, factors that could explain this optimism are the fuel price and the performance of monetary policy.

However, the forecast growth for 2009 is 2.9 percent below the figure for December, when it was estimated at 3.3 percent. According to analysts, the main factors that could affect the growth of economic activity is how well fiscal policy performs, the international price of oil, price stability, and interest rates, among other factors.

The confidence index of the survey also declined, standing at 18.18, down 8.14 percent from the index recorded in December.

The index is based on four questions answered by the panel of experts. One of the questions is whether they expect the country to show improved economic performance in the next six months, of which one hundred percent said no. As to whether the current situation is positive for investment, 63.6 percent are not sure and rest said that it's a bad time for investment. 54.5 percent of respondents believed that the business climate will worsen in six months, compared to the last period. When asked whether the economy is better than a year ago, 81.8 percent answered no.

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