Guyana Budget Speech 2012.  By Dr. Ashni Singh, Minister of Finance

According to Dr. Singh the Guyanese economy is at its strongest in recent memory. He continues, "our productive base is showing increasing signs of resilience and dynamism and is more diversified than ever before, with real growth in gross domestic product averaging 4.4 percent over the past five years. At the same time, our external balances are at their highest ever with our external reserves rising threefold since 2006 to US$798 million."

Dr. Singh continues, "we are much less indebted as a nation than we were twenty years, with external debt being reduced from 658 percent of GDP at the end of 1991 to 47  percent at the end of 2011. Our fiscal deficit is on a declining trend, having been reduced from 11.2 percent in 2006 to 4.4 percent in 2011."
source: Government of Guyana

General Trends

According to ECLAC's flagship report 'Economic Survey of Latin America and the Caribbean 2009-2010', Guyana was one of the few countries in the Caribbean to experience robust growth in 2009. Recent estimates suggest that the economy grew by 3.3% in 2009 and 2% in 2008. Fairly robust primary commodity prices in world markets were one of the main reasons for the country’s performance. Growth of 4.3% is anticipated for 2010.
source: ECLAC

Commodity Market Update.  First Quarter, 2010

The Ministry of Agriculture has predicted that on average food prices are expected to rise by 11.3% in 2010.
Source: Guyana. Ministry of Agriculture

Economic Survey of the Caribbean 2008-2009

The survey provides an overview of the economic performance of countries of the Caribbean Community (CARICOM) for the year 2008 and their outlook for 2009.

General Trends
Guyana’s economic growth slowed to 3.1% in 2008, dampened by a mixture of external and internal factors, such as the global recession and the struggle of the sugar industry. The current account deficit deteriorated significantly (25.8% of GDP), while the external public debt increased substantially to 72% of GDP. However, inflation decelerated significantly (6.4% ecember-December).

Guyanese authorities implemented, through 2008, diverse measures aimed at countering the impact of negative externalities; fighting price inflation during the first half of the year; and, during the second half, managing to keep financial markets steady and preserve economic growth. Nevertheless, those efforts resulted in loss of consumption tax income,lower capital expenditure and increased stock of public debt. Official estimates for 2009 point to substantial growth, low inflation, and modest improvement of external accounts.

However the structural weaknesses of the economy remains, and will probably be exacerbated by the deepening of the global crisis. With a commodity-based export sector, a significant dependence on remittances from abroad, a high poverty rate and an elevated debt to GDP ratio, Guyana’s fiscal and monetary authorities will have to perform carefully to preserve stability and growth.
source: ECLAC

Economic Performance

During 2008 Guyana’s economy faced mounting difficulties as a result of the ongoing global recession and increasingly adverse international environment. GDP growth posted a rate of 3.1%, lower than the 5.4% recorded in 2007. The widening trade and current account deficits and the significant increase in external debt were other main macroeconomic concerns. In the context of falling exports prices and weakening internal and external demand, Guyana will have to struggle for significant economic expansion in 2009, says ECLAC in their latest report Preliminary Overview of the Caribbean  2008-2009

Economic Survey of the Caribbean 2007-2008

The survey provides an overview of the economic performance of countries of the Caribbean Development and Cooperation Committee (CDCC) for the year 2007 and their outlook for 2008. The last chapter presents country briefs with the main macroeconomic developments in 2007 and the outlook for 2008.

During 2007, the economy of Guyana kept on a path of recovery and expansion, recording growth of 5.4%. This was a record figure for the last decade, especially after the stagnation period suffered between 2000 and 2005, when GDP growth averaged less than 0.2% annually. New investments and projects in several productive sectors (sugar processing, hydroelectric generation, gold and bauxite mining, oil extraction, etc.) aim to boost and sustain the current trend of economic growth for the next few years.

A major financial event for Guyana in 2007 was the drastic reduction in the level of the external debt, thanks to a wide forgiveness programme of multilateral debt. In this scenario, the central government’s surplus in the primary balance widened to 10.0% of GDP while the overall fiscal deficit narrowed to 7.4% of GDP.49 Efforts to keep the Guyana dollar’s nominal exchange rate stable were quite
successful, with an accumulated annual nominal depreciation against the United States dollar of just 1.2%.

However, there are concerns on how stable Guyana’s economy is, regarding the impact of external negative factors, like the sustained rise in food and oil prices or the sub-prime crisis currently affecting the United States. Particularly worrisome are the large current account deficit, which amounted to US$232 million (21.6% of GDP) fuelled by the increase of expenses on imports, and the steep increase of the inflation rate to 14.1%, which is a major concern for the government because of its direct influence on economic and social welfare and development.

Economic Performance

Guyana: Why Has Growth Stopped? An Empirical Study on the Stagnation of Economic Growth
IMF Working Paper, April 2007.
After a period of exceptionally strong economic performance, Guyana’s growth has stagnated since 1998. The paper tries to identify the factors that can explain this dramatic deterioration in economic performance. The paper first attempts to explain the decline of growth with a growth accounting exercise which shows that there was a significant swing in total factor productivity, and than uses a panel regression framework to analyze the growth impact of changes in various factors. Finally, through a series of cross-country exercises, the paper shows that the primary reasons for the divergence between the economic performance of Guyana and other Caribbean, HIPC, and PRGF-eligible countries in 1998-2004 are a substantial decline in share of net foreign and private domestic investment in GDP, a decline in the labor force, and a less favorable political and institutional environment.

CHALLENGES

Update on the Poverty Reduction Strategy

Key issues identified in the Guyana’s 2005 Poverty Reduction Strategy Progress Report were; (i) the neglecting response of mitigating measures to decrease the vulnerability to natural disasters; (ii) the stagnation of presenting a business friendly environment; (iii) more emphasis must be placed on traditional sectors( agriculture, mining, forestry) as they account for 34% of GDP; (iv) Improving competitiveness internationally is essential, since the open economy’s exports account for over 75% of GDP where assistance of export promotion from the Guyana Office of Investment (Golnvest) could be facilitating in this respect; Improving the monitoring and evaluation with updated poverty statistics (vi) finally, the report identifies problems of demographic changing due to high migration of skilled labourers.

Adopting a Formalised Plan

For years, the Guyana government has tried to conquer the troublesome task of alleviating poverty. In its efforts, economic policies and reforms on Guyana’s socio-economic development have been to no avail. Migration is the most observable problem that hinders upon the quality of human capital in Guyana. An IMF working paper, Emigration and Brain Drain: Evidence from the Caribbean, shows Caribbean countries ranking within the top 20 in the world in terms of skilled emigration rates. Moreover, Guyana emigration rates (in reference to educated labour force) stood at the highest amongst all countries, at 89%.