Following the presentation of the 2019 Mid-year report, which shows a four per cent growth in the economy, Finance Minister Winston Jordan declared that such growth reflects confidence in the economy.
However, People’s Progressive Party’s Presidential Candidate Irfaan Ali is not too optimistic about the country’s economic fortunes.
Ali posited the half-year report confirms that “the economy continues to suffer from extreme fatigue.”
He said “the growth rate of the economy for the first half is not only lower than the corresponding period one year ago, but will contribute to economic growth that is below the level projected for 2019.”
These outturns, Ali highlighted, point to an economy that is struggling and consistently underperforming rather than one that is strong and improving.
“The consistent underperformance of the economy is also highlighted by the average half-year growth of 2.9 percent recorded under the ANPU government during the period 2015-2019 compared with 4.2 percent during the last five years when the PPP-C was in office (2011-2014),” he noted.
Notable contraction
The former Housing Minister noted that the “poor performance” of the economy in the first half of 2019 may be attributed to “notable contraction registered in the sugar, livestock, fishing, bauxite, and other mining sub-sectors, which declined by 2.7 percent, 8.1 percent, 12.2 percent, 2.9 percent, and 0.7 percent respectively.”
Leading the sluggish economic performance for the first half of 2019, was agriculture sector which contracted by 0.3 percent; compared with a growth of 4.9 percent during the corresponding period last year. This key sector was projected to grow by 3.9 percent during 2019. However, the growth forecast for the sector was adjusted downwards to 1.4 percent this year.
Ali noted that the poor performance of sugar subsector was due to the late delivery of materials and extended maintenance of equipment at the sugar factories that delayed production.
“This caused sugar production to reach its lowest level of 33,531 metric tonnes during the first half of 2019. Compared with the first six months of 2014, this represented a 159 percent decline in sugar production,” he declared.
Ali further stated that according to the half-year report, production for the remainder of the year and 2020 is likely to be affected by delays in procurement.
This he said is “a clear manifestation of mismanagement”
The sugar subsector is now projected to grow by 2.3 percent during 2019 instead of 15.6 percent declared in the 2019 National Budget last November.
Ali pointed to export revenue from sugar declining continuously under the Coalition government, adding that that trend is anticipated to continue.
“Revenue from the export of this commodity (sugar) contracted from US$34.4 million during the first half of 2014, to US$12 million during the corresponding period in 2019. The budgeted export revenue of US$29.4 million for the entire 2019, which is 15 percent less than the half-year amount for 2014, was adjusted downwards to US$25 million due to gross mismanagement and the concerted efforts by the APNU-AFC government to destroy this industry,” Ali explained.
With regards to the contraction of the livestock sub-sector, Ali said the decline in mutton, chicken and milk production has affected the entire population.
Ali said the mid-year report failed to highlight the cause of the decline in the production of chicken which he said is “the prohibited and rising cost,” a major disincentive to local producers.
Based on the performance of the livestock subsector during the first half, this sector is now forecasted to register growth of 0.7 percent instead of 2.3 percent for 2019.
Meanwhile, Ali stated that the fishing sub-sector suffered a major setback from decline in shrimp production and industrial finfish production.
Touching on the bauxite and other mining sub-sectors, the PPP Presidential Candidate stated both contracted, by 2.9 percent and 0.7 percent respectively.
“As a consequence, the budgeted growth targets for 2019, were reduced,” he said.
The growth target of 8.6 percent for the bauxite during 2019 was lowered to 1.3 percent.
The export revenue from this commodity had to be reduced from US$162.9 million to US$131.3 million. Similarly, the other mining sub-sector growth target was revised downwards from 5.3 percent to 1 percent for 2019.
Balance of Payments
Ali also shared his sentiments on Balance of Payments, stating that the current account deficit during the first six months of 2019 was US$866.8 million; US$288.3 million more than the deficit of US$578.5 million recorded last year.
“Notwithstanding improvements in the capital account, the overall deficit was US$86.9 million during the first half of 2019, compared with US$139.8 million during the corresponding period last year,” he asserted.
He added that based on the Balance of Payments in the half-year report, the economy will struggle for the remainder of the year.
“In his report, the Minister attempted to hide this fact by presenting unrealistic growth forecasts for the various sectors. The more realistic projections of the sectoral performance, however, are contained in the Balance of Payments generated by the Bank of Guyana,” the presidential hopeful pointed out.
“This statement shows that forecast revenue of all the primary export commodities, including, bauxite, sugar, timber were revised downwards.”
He added that the poor performance in the key export sectors coupled with the expansion of imports will lead to a widening of the deficit in the current account to reach US$1,378.9 million, “more than three time the deficit of US$361.5 million in the 2019 Budget.”
The overall balance which was projected to be a surplus of US$15 million is consequently expected to change to a deficit of US$106.13 million, Ali envisaged.
“The international reserves will therefore be depleted further and greater pressure will be placed on the foreign exchange rate, which in turn will translate into higher inflation. According to the Balance of Payments, the government will be forced to borrow and hope for debt relief,” Ali stated.
Inflation
Zooming in on the 12-month inflation rate, Ali contended that it will continue to trend upwards as a result of increases in the price of commodities such as meat, fish, vegetables, vegetable products, condiments and spices.
He argued that these increases are strongly correlated with the marked reduction in the output levels reported in the livestock and fishing subsectors.
“The Minister posited in his half year review that inflation will be contained at 2.5 percent. However, it is my respectful view that excess demand for these food items will persist thereby and depreciation in the foreign exchange rate will cause further spike in the inflation rate,” Ali suggested.
For more of Ali’s analysis of the mid year report click here
