Guyana’s macroeconomic environment continues to remain stable notwithstanding the Novel Coronavirus Disease (COVID-19) pandemic, the Inter-American Development Bank (IDB) said while noting that the country is on track to achieving a real Gross Domestic Product (GDP) growth rate of 26.2 per cent at the end of 2020.
In its ‘Caribbean Quarterly Bulletin,’ the IDB explained that the country’s macroeconomic environment is categorized by positive growth, low inflation, and a stable exchange rate.
“The International Monetary Fund (IMF) has estimated real GDP growth for 2020 at 26.2 percent. Overall price levels show significant stability, with the annual inflation rate averaging 1.8 percent over the last three years,” the IDB said.
The inflation rate in 2019 was 2.1 per cent. However, the IMF projects the inflation rate will fall to 1.3 per cent in 2020 before picking up to 2.9 per cent in 2021.
According to the IDB, the pandemic has had varying impacts on the traditional sectors, with the Services Sector being significantly affected.
“The largest productive sector of the economy, agriculture (17.6 percent of GDP), suffered a contraction of 4.1 percent in the first half of 2020. However, rice production is expected to expand by around 3 percent in 2020, which would contribute to mitigating the contraction in agriculture. The mining industry, Guyana’s second largest sector with 14.9 percent of GDP, expanded by 343.7 percent in the first semester after oil production began in December 2019. Gold production, representing almost 10 percent of GDP, grew by 2.1 percent in the first half of the year, bolstered by historically high prices of gold,” the IDB said in its report.
However, as a result of the social distancing policies instituted to suppress the spread of the virus, the services sector, the bank said, was hard hit by the pandemic. According to the IDB, that sector experienced a decline by 3.8 per cent in the first half of the year, with wholesale and retail trade falling by 14.7 per cent, transportation and storage by 25 per cent, and accommodations and food services by 32.9 per cent.
The construction sector, which had been growing at relatively high rates prior to the pandemic, fell by 5.6 per cent. Authorities estimate that non-oil GDP contracted by 4.9 per cent in the first half of 2020, and it is projected to fall between 1.4 and 4.3 per cent in the full year.
The IDB said Guyana is experiencing real economic growth at a time when other members of the region are feeling the negative impact of the COVID-19 pandemic, which for months, brought the wheels of the productive, industrial and tourism sectors to a grinding halt.
“For most Caribbean countries, the COVID-19 pandemic will translate into the deepest single-year contraction of real GDP on record in 2020. With the exception of Guyana, countries have experienced deep recessions, severe increases in unemployment, and long-lasting damage to many corporate and household balance sheets. The social consequences of the crisis continue to amount, and despite governments’ best efforts to buffer the shock to families, enterprises, and domestic markets, there remains a dire need for continued and more broad-based stimulus to ensure that economic capital – both human and otherwise – remains intact,” the IDB said.
In analyzing the country’s economy over the last five years (2015-2019), the Bank said Guyana had experienced notable growth.
“During the five-year period between 2015 and 2019, GDP grew at an average annual rate of 3.6 percent, surpassing the average of 2 percent for Latin America and the Caribbean and placing Guyana 5th out of 26 countries. GDP growth reached 5.4 percent in 2019, higher than the 4.4 percent in 2018,” the IDB said.
Real economic activity, it said, picked up in both 2018 and 2019, with important growth in the economy’s largest sector, services. “The growth outlook in the medium term remains positive based on continued improving perspectives for oil production, despite low oil prices and the coronavirus pandemic,” it pointed out.
With approximately 8 billion barrels in petroleum reserves, Guyana, the IDB said, is in the process of becoming of one of richest countries in petroleum reserves per capita in the world.
However, it said despite these relatively large reserves, the country faces many hurdles and challenges in preparing itself to prudently manage this coming natural resource windfall and derive the greatest benefits for its people.
