BoG report signals economic crisis

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… projects rising unemployment, reduced export earnings for Guyana

While the A Partnership for National Unity/Alliance For Change (APNU/AFC) artificially prolongs its time in office, the Bank of Guyana has sounded the alarm on the impending economic gloom facing the country.

In the Bank’s recently released quarterly report and statistical bulletin for the first quarter of 2020, it was observed that Guyana will be unable to escape the effects of the expected slowdown in global economic growth.

In fact, the report notes that the world is likely to experience the worst depression since the great depression of the 1930s. According to the report, a number of businesses and the ordinary man, are likely to be affected in Guyana during the remainder of 2020.

Governor of the Bank of Guyana, Dr Gobind Ganga

“The daunting prospects for the global economy are likely to adversely impact commodity-exporting economies like Guyana, as demand for exports are expected to decline resulting in lower export prices.”

According to the Bank, the global slowdown coupled with the several measures Guyana has taken since its first COVID-19 case on March 11, 2020, will have a debilitating effect on the economy. Among the alarming projections the Bank made, was a rise in unemployment.

“These measures, which have limited business activities and mobility, are expected to result in a decline in economic growth, largely in the services sector. A number of businesses in the services sector, particularly wholesale and retail trade and transportation, will be affected and subsequently, unemployment levels will increase.”

Another worrying projection the Bank of Guyana made, was a rise in the balance of payment deficit. Balance of Payment (BoP) or trade balance, is a summary of statistical data on a country’s fiscal transactions, including imports and exports. To record a deficit, Guyana would, therefore, have had to spend more on imports, among other things, that it derived from exports.

Bank of Guyana

The last time in recent history that Guyana’s trade balance recorded a surplus was under the People’s Progressive Party (PPP) Administration in the years 2009, 2010 and 2012. But the main export earners, in particular sugar, have suffered under the current Government. According to the report, the situation will only get worse due to the decline in export earnings.

“The balance of payments deficit is projected to expand on account of declining export earnings, remittances and FDIs. Foreign exchange earnings will undoubtedly decrease, resulting in lower international reserves,” the Bank stated.

“The contraction in business activities will significantly reduce Central Government’s revenues and this, coupled with the expenditure Government will have to spend to aid the fight and recovery of the coronavirus, will lead to a larger fiscal deficit. Consequently, debt levels will rise as the Government seeks to fill financing gaps.”

Since the detection of the deadly COVID-19 disease in Guyana, the APNU/AFC Government has taken a number of steps from closing its borders to mandating that only essential businesses open their doors. The remaining businesses have received nothing in the form of a stimulus from the Government, which last passed a budget in November of 2018. There have been reports of workers being laid off, businesses closing their doors for good and investments being held up.

The economic problems created by COVID-19 are compounded by Guyana’s political crisis. It has been over four months since Guyanese went to the polls and there has been no lawful result.