Making it known that Guyana has the lowest non-performing loans of any country in the Region, President Dr Irfaan Ali has hailed the expanded lending of the banks across economic sectors as just one sign that Guyana is steering clear of the dreaded Dutch Disease.
During the commissioning of Republic Bank’s new $1.2 billion branch at Williamsburg on the Corentyne on Saturday, the President spoke of how far the banking sector – and, indeed, the economy – has come over the past four years.
“The type of success the banking sector is enjoying today is not accidental. Because three years ago they would tell you what their non-performing loan [portfolio] was. And let those who like to write, write about that. What was the percentage of non-performing loans four years ago, against what it is today? What was the portfolio for lending and construction, real estate, four years ago, against today?
“What was the portfolio for lending for agriculture four years ago, as against what it is today? And you will see double and triple-digit increases in the lending portfolio. And you will see non-performing loans at 2.8 per cent, the lowest in any part of this Region – Latin America and the Caribbean – the lowest non-performing loans,” President Ali said.
The Head of State made it clear that the current 2.8 per cent non-performing loan rate, the lowest in the Region, did not happen by accident. The President pointed out that this was an indicator of the fact that money was circulating in the economy more than ever.
“That is not accidental. That is because there is more money in the economy. That is because there is more disposable income. That is because people are in a better position to service their loans,” he explained.
“That is because the economy is performing better and creating better opportunities for people to be integrated into the financial services, that you have the expansion of lending in every single sector. That is not accidental,” he said.
Dutch Disease
In the past, President Ali has assured that his administration has been careful to not overspend and bring on Dutch Disease, an economic term for the negative consequences that can arise from a spike in the value of a nation’s currency. According to the President, all the indicators point to Private Sector growth and lending, positive signs that Guyana is doing a good job avoiding the Dutch disease.
“When you look at the growth in the Private Sector, you would see that in real estate mortgage loans, there’s an increase of 22 per cent. When you look at the credit to the traditional sectors, agriculture credit grew by 14.4 per cent, construction and engineering by 21.7 per cent. Credit to real estate grew by 22.5 per cent, and mining and quarrying grew by 18 per cent. Now, if you take countries that went through the same development model that we’re going through and you hear about the Dutch disease, you would have seen that when oil and gas resources came, credit to the traditional sectors and other bases of the economy declined and the credit was concentrated in oil and gas. What we’re seeing here, we’re seeing that the disbursement of credit and dispersion of credit is around many sectors. And that tells a story that the economy is being diversified and being built to avoid the Dutch Disease,” the President added.
Last year, Guyana’s oil and gas sector expanded by 45.9 per cent with production of 142.9 million barrels of oil compared with 101.4 million in 2022. This includes the production of crude oil at a rate of approximately 142,000 barrels per day (bpd) at the Liza Destiny Floating Production, Storage and Offloading (FPSO) vessel, while the Liza Unity FPSO produced at a rate of 235,000 bpd.
In contrast, the gold mining industry contracted by 11.2 per cent in 2023, on account of lower output from the small and medium-scale producers. Total gold declarations fell to 432,113 ounces last year. Similarly, the bauxite mining industry also declined by 20.4 per cent last year owing to reduced output from both producing operators. Bauxite production is estimated to have fallen to 525,000 tonnes last year.
The other mining subsector – sand, stone, diamonds, and manganese – showed a more positive performance with a 22.7 per cent growth in 2023. Expectedly, stone and sand extraction increased by 98 per cent and 21 per cent, respectively, with demand from construction activity in the public and private sectors continuing to grow.
Predictably, as well, the construction sector grew by 26.8 per cent last year, building on the 26.3 per cent growth seen in 2022. While in the service sector, a 10.3 per cent expansion was recorded across all of the service industries.
Initial projections had pegged the country’s real Gross Domestic Product (GDP) to grow by 25.1 per cent in 2023, with non-oil GDP expanding by 7.9 per cent. However, it was subsequently revealed that Guyana’s real GDP surpassed expectations and expanded by 33 per cent overall last year, with a “stronger-than-expected” growth of 11.7 per cent in non-oil real GDP.
