Central Bank revises Govt’s economic growth projections downwards …says if political uncertainty continues overall economic outlook could be affected

Finance Minister Winston Jordan
Finance Minister Winston Jordan

During his budget speech last year, Finance Minister Winston Jordan had announced that real economic growth is expected to be 4.6 per cent in 2019. However, figures released recently by the Bank of Guyana have downsized this prediction.

According to the central bank in its 2018 Annual Report, Guyana’s economy is actually projected to grow by 4.4 per cent by the end of 2019. According to the report, various productive sectors are expected to record growth.

“The economy is projected to grow by 4.4 per cent at the end of 2019 on account of growth in the major economic sectors. The agriculture sector is expected to increase by 3.2 per cent, due to the increases in other crops by 4.0 per cent, production of rice by 3.4 per cent and the output of sugar by 3.2 per cent.

“The mining and quarrying sector is forecasted to expand by 3.4 per cent due to increases in the production of bauxite by 10.0 per cent and gold by 1.7 per cent. The services industry is estimated to grow by 3.7 per cent on account of higher outturns of wholesale and retail trade by 5.0 per cent and transportation and storage activities by 3.5 per cent,” the report states.

Meanwhile, the report projected that Guyana’s construction and manufacturing industries are projected to increase by 10.5 per cent and 3.8 per cent respectively. It also projected that inflation rates would be measured at 2.5 per cent owing to moderate increases in food and fuel prices.

The central bank noted that global growth in 2019 is expected to slow to 3.5 per cent, partly owing to the negative effects of tariff increases enacted by the United States against China. As such, the bank projected that growth in advanced economies is expected to decline to 2.3 per cent.

“Additionally, economic expansion in emerging markets and developing economies is expected to hold steadfast in 2019 at 4.5 per cent. Latin America and the Caribbean is expecting growth of 2.0 per cent in 2019.”

The report states that economic recovery in the Region will be supported by increased demand from external trading partners and the option of better financial conditions rather than the volatile international financial market. It projected overall growth of 2.0 per cent in the Caribbean for 2019.

Another bank, the Caribbean Development Bank (CDB), has previously warned that with the prevailing uncertainty in Guyana regarding elections (and the Caribbean Court of Justice (CCJ) ruling on last year’s no-confidence motion), political uncertainty can have a significant impact on Guyana’s preparations for first oil and the overall economy.

This warning was contained in the Bank’s country economic review of Guyana for 2018, the year in which a government was toppled after a no-confidence vote was passed for the first time in Guyana’s history.

The Bank explained that this includes minimising negative impacts on traditional sectors.

In the report, it notes that Guyana’s economy grew by 3.4 per cent for 2018.

However, the banking institution warned of the risks to Guyana’s progress in preparing for the oil and gas sector and indeed, the overall macro-economic outlook if political uncertainty continues.

“Guyana is on the verge of a sharp increase in economic growth, but immediate prospects partly depend on ending political uncertainty,” the report states. “In the November 2018 budget speech, the Ministry of Finance was targeting 4.6 per cent (Gross Domestic Product) growth in 2019.

These warnings were echoed by the Georgetown Chamber of Commerce and Industry (GCCI), which has warned about the impact of the political climate on businesses. In fact, the Chamber did a survey earlier this year that found that the political climate has been bad for business.