In an attempt to bolster his economic credentials, The People’s Progressive Party’s Presidential Candidate, Mr. Irfaan Ali, has shared his views on this year’s Mid-Year Report. However, upon reading his analysis of this report, The Guyana Business Council believes that Mr. Ali’s time is better spent bolstering his academic credentials.
Mr. Ali stated that over the last five years (2015 to 2019) the country’s mid-year economy has underperformed. However, how can the current administration, which was elected in mid-2015, be responsible for the performance of the economy in the first half of that same year? Therefore, it is sophomoric for Mr. Ali to attribute the 2015 mid-year economic performance to the policies of the current administration.
The reality is that the last four mid-year reports (2016 to 2019) describe an economy that grew by an average of 3.25% compared to a mid-year average of 2.65% from 2012 to 2015. Furthermore, in June of this year, The International Monetary Fund (IMF) described Guyana’s medium-term economic prospects as favorable, its public finances as improved and its economy as broad-based. The last two mid-year economic performance of 4.5% and 4.0%, respectively, has been the strongest since 2011. Therefore, it perplexes The Guyana Business Council that Mr. Ali would claim that Guyana’s economy is underperforming.
Mr. Ali has attributed the “poor performance” of the economy in the first half of 2019 to a “notable contraction” in sugar, livestock, fishing, bauxite and other mining items. Indeed, Mr. Ali correctly highlights that these subsectors have weakened during the first half of 2019. In fact, in the first-half of 2019, these five subsectors contracted -5.3%. Most of this economic weakness occurred in the livestock subsector, owing to a shortage of chickens and in the fishing subsector, where the sargassum seaweeds have negatively impacted the fishing industry.
These subsectors are important to the economic viability of many Guyanese and they continue to play a pivotal role in Guyana’s development. However, it is professional malpractice for Mr. Ali to focus on the struggles of five subsectors that collectively contribute less than 10% of the nation’s economic activity but ignore the successes of the five main drivers of the nation’s economy.
These five subsectors: wholesale & retail trade, construction, transportation & storage, gold, and information & communication, collectively contribute close to 53% of Guyana’s economic activity and during the first-half of 2019, averaged a robust 5.5% GDP growth rate.
Balance of Payments
Mr. Ali accurately points out that during the first-half of 2019, the current account deficit increased 50% to US$866.8M compared to the same period last year. However, Mr. Ali neglects to focus on the underlying reasons for this increase and how it would impact the economy. The significant increase in the current account deficit is attributed to a 41% increase in non-fuel & lubricants imports. Without obtaining the details of Guyana’s imported goods and services, The Guyana Business Council cannot determine if the significant increase in imports is a sign of economic strength or competitive weakness.
For instance, if the lion’s share of the increased in imports came from products that compete with domestic products, this is a clear sign of competitive weakness. Alternatively, if most of the increase came from products such as construction and mining equipment, that contribute to the economic development of Guyana, this is a clear sign of economic strength.
In the first-half of 2019, the capital account surplus increased 66% to US$795.2M, owing to a 67% net increase in foreign direct investment (FDI) compared to the first-half of 2018. Remarkably, net foreign direct investment totaled US$803.5M, the largest amount ever recorded during any six-month period. While, Mr. Ali is busy crying wolf, the international investors are busy investing in the Guyanese economy.
Guyana has a strong fiscal position. According to the IMF’s 2019 outlook, Guyana is the 4th least indebted CARICOM nation and the multilateral organization anticipates that the country’s Debt to GDP ratio will continue to decrease, owing to the country’s exponential GDP growth rate and its declining sovereign obligations.
The Guyana Business Council has full confidence in Guyana’s economy and it is our duty to enlighten Guyanese on the true nature of our economy. No politician, sitting or in the opposition, who truly cares about our country should gaslight the Guyanese people by painting an untrue picture of gloom and doom.
The Guyanese people deserve better. They need accurate information to help them make the intelligent financial decisions so that they can position themselves to capitalize on our nation’s economic boom.
We implore our fellow Guyanese to don’t blinding listen to what our politicians are feeding us but do your own research, look at the changes occurring in front of your eyes. Ask yourself, why are so many foreigners suddenly attracted to Guyana? Why are companies such as MovieTowne and Giftland setting-up shop? Why is Pegasus Hotel expanding?
Why are international airlines clamouring to establish a route to Guyana? Why are our ports the busiest that it has ever been?
These activities do not reflect an anemic economy but rather one that is on the verge of a sustained economic boom.
Rennie Parris, CFA
President of The Guyana Business Council
Vice-President of The Guyana Business Council