The Economy: Guyana’ Economic performance for the fiscal year ended December 2017
The Bank of Guyana Annual Report for 2017 was recently made available on the Bank’s website, an important document that presents a detailed report on the performance and developments within the economy.
Having reviewed same, it was shown that real GDP growth declined by 1.3 percent from 3.4 percent for the corresponding period in 2016 to 2.1 percent in 2017.
It was noted that this outturn was on account of economic uncertainty, adverse weather conditions and operational costs of sugar, gold, bauxite, diamond and financial and insurance activities.
On the other hand, improved performances were reflected in the rice, construction and services sectors, as well as higher private and public investments.
Sugar output decreased by 25 percent to 137,307 tonnes from 183,491 that was recorded in 2016. This outturn was largely on account of the downsizing of the Guyana Sugar Corporation (GUYSUCO).
The agriculture sector experienced a marginal improvement of 0.4 percent compared to a recorded decline of 10.3 percent in 2016, owing to higher output of rice, forestry, fishing, and other crops. The rice output increased by 17.9 percent to 630, 104 tonnes from 534,450 tonnes recorded in 2016.
The mining and quarrying sector contracted by 8.8 percent owing to adverse weather conditions, operational challenges and volatile commodity prices.
Bauxite production decreased by 1.3 percent – down from 1,479,090 tonnes recorded in 2016 to 1,459,223 tonnes in 2017. Total gold production was recorded at 653,753 ounces, down from its 2016 level of 712,706 ounces reflecting a decline of 58,953 ounces or 8.2 percent.
Total diamond declaration also experienced a dramatic shortfall when compared to its 2016 level from 139,890 carats to 52,161 carats in 2017, reflecting a decrease of 62.7 percent.
This outturn was on account of weak demand coupled with increases in labour costs, fuel and other operational costs, and reduced investment in equipment and machinery.
The construction industry recorded growth of 11.4 percent on account of increases in public investments, while private construction remained relatively subdued.
Output in the manufacturing sector increased by 4.0 percent owing to increased rice milling activities, and other manufacturing goods by 17.3 percent and 3.1 percent respectively.
The services sector grew by 3.6 percent as compared to 0.7 percent growth in 2016, also represented 53.6 percent of GDP in 2017. This outturn, was due to increases in experienced in wholesale & retail trade, transportation and storage, public administration, information and communication, education, health, social services, real estate activities, and other services.
In contrast, financial and insurance activities unperformed compared to the previous year.
On the international trade and balance of payment front, the deficit in the current account expanded to US$287.4 million above the 2016 level of US$12.4 million, reflecting a dramatic expansion in the current account deficit by US$275 million or 2,218 percent.
This outcome was mainly due to expansions in the merchandise trade and services deficits.
The Bank projected that the economy will grow by 3.8 percent at the end of 2018, on account of growth in most of the sectors except agriculture.
Overall, the macroeconomic outcomes for the fiscal year ended December-2017, was certainly not one of the best years, compared to the previous years. The statistics presented herein, which were extrapolated from the 2017 Bank of Guyana Annual Report, indicates such picture – characterized by a sea of economic challenges and uncertainties.
This in turn, resulted in some of the traditional sectors underperforming – despite attempts of instituting policy mechanisms in the national budget presented by the Honorable Minister of Finance, aimed at invoking some degree of fiscal stimulus to revamp the economy.
Fiscal Policy for Sustainable Development in Resource –Rich, Low Income Countries
Fiscal policy in many resource – rich developing countries raises many distinctive issues. Taxation and royalties from natural resources often become the main sources of government revenue. International resource prices are highly volatile, tending to induce high volatility in government revenues and economic activity.
Within the context of capital and long term growth theory, the key to increasing overall national wealth, which includes not only traditional measures of capital such as produced and human capital, but also natural capital.
In order to ensure long-term sustainable growth, resource-rich countries, like Guyana, need to capture an efficient and fair share of natural resource rents and then invest that share of effectively to increase the wealth of the country. Increasing the wealth of the country also means, increasing the wealth of the people.
In so doing, fiscal policy and good public sector governance become essential (Brahmbhatt & Canuto, 2012).
The government also faces difficult decisions on how much of revenues should pass on to citizens directly through tax cuts and how much to retain in public hands; on how much of the public share to consume and how much to save and invest; and how to allocate public investment optimally (for example, between holding foreign assets and investing in public infrastructure).
An example of a strategy of boosting public investment requires that countries “invest in their capacity to invest” – that is, they appropriately appraise, select, and manage public investments so that potential high returns become a reality.
Such an improved system increases productivity growth and thus should have a continuing impact on growth, in contrast to reforms that yield a one-off increase in the level of output (Brahmbhatt & Canuto, 2012).