THE local economy declined by 2.5 percent during the first half of 2015 compared to the same period in 2014, according to mid-year report released by the Ministry of Finance. The decline the report said was a result of the delay in the presentation and passage of the national budget.
“The proroguing of Parliament in late 2014, the uncertainty that usually surrounds the electoral period and a budget being presented in the second half of the year, together have led to a slowdown in public sector spending and some hesitancy in private sector investments,” the report said.
“This delay meant that many government agencies were unable to carry out their planned programmes for the year.
“Many projects were held in abeyance, while only a few projects which were “rolled over” from the previous year attracted funding.
“At the same time, the atmosphere of uncertainty and tensions surrounding the holding of general elections, led to investors postponing decision in many cases,” the report stated.
However, notwithstanding the challenges faced during the first half of the year, growth is expected to reach 3.4 per cent. “We remain sanguine that the end- of- year projection will be achieved,” the report said.
“However, with the installation of a new government and the passage of the national budget, growth is expected to surge in the second half of 2015 and is projected to reach 3.4 per cent, as a result of measures outlined in Budget 2015.”
Sugar production grew “encouragingly” by 1.6 percent in 2015, to reach 81, 271 tonnes. Based on the half- year performance, the whole- year projection remains at 219, 913 tonnes. “Even though the industry has projected a more buoyant outcome of 227, 4000 tonnes for 2015 the lower estimate has been used given past experiences.”
The slight increase of 1.7 per cent in 2015 production resulted from better weather conditions, facilitating increased harvesting of canes, coupled with the ongoing efforts to resuscitate GuySuco including a $12 billion injection by government.
“Notwithstanding this performance, the industry’s average cost of production remains excessively high. The report from the Commission of Inquiry (CoI) which is expected in October 2015 will be a critical input in determining the future of the industry,” the report added.
The rice industry continued to record “exceptional growth.” Production in the first half of 2015 was 359, 960 tonnes, 15.3 percent over last year’s record- high, first-half production of 312, 283 tonnes. “In light of that performance, the end –of- year output and growth projections have been revised upwards to 703,462 tonnes, equivalent to 10.7 percent over the 2014 record production level. It is lamentable that the phenomenal growth in the production of rice is unmatched by the growth in the diversification of the export market, as well as the absence of value- added products, the report added.
Tremendous support has been given to the rice industry with $9 billion being transferred to the Guyana Rice Development Board in June 2015. The uncertainty in the market following the loss of the Venezuelan market under the PetroCaribe Rice Trade Agreement has heightened, but government says “it is committed to assisting the farmers to find alternative markets and will support private sector initiatives to secure the future of the industry.”
Meanwhile, the production of the other crops subsector rose by 5 per cent over the half year output for 2014. “The subsector is projected to grow by 2.0 percent in 2015.
The livestock industry recorded a 15 percent growth in the first half of 2015 compared to the same period in 2014. This is a result of growth in poultry, egg, mutton and milk production. “The sector is projected to grow by 8.9 per cent for this year, with poultry and egg production continuing to be the main drivers of this growth.”
There has been an 11.6 percent decline in the fisheries sector, the mid-year report said. “The fisheries sector continued its downward spiral in the first half of 2015.
“This persistent contraction in the industry has been the result of overfishing and possible under-declaration, combined with smaller fleets, lower harvesting in aquaculture, piracy and the occurrence of sargassum seaweed. Performance is projected to improve in the second half of 2015, due to the reduction in the occurrence of sargassum seaweed, greater enforcement of fishing regulations and anti-piracy efforts.”
Similarly, the forestry sector contracted by 9.8 per cent in the first half of 2015, as compared with the same period in 2014. “This was due partially to unusual May/June rains which created conditions that were not conducive to harvesting.”
Additionally, the average price per cubic metre, for Wamara logs, a major forestry commodity, fell from US$196.92 in 2014 to US$176.25 in 2015, the report stated.
“Improved weather is anticipated in the second half of the year and with all annual approvals secured in the first half, growth is projected to improve significantly with the end- of- year performance projected to deliver 2.2 percent.”
Mining and Quarrying
The mining and quarrying sector also declined during the first half of the year. The sector declined by 17.4 percent as compared to the first half of 2014. This reflected a fall in gold, bauxite, and stone production by 16.2 percent, 18.6 percent and 54 percent respectively.
Since 2013, the sector has been contracting “largely as a result of declining commodity prices for both gold and bauxite, the two major industries in the sub-sector.”
Gold Prices continued to fall, reaching a five- year low. “This combined with extensive smuggling of gold, estimated to be as much as 15,000 ounces per week, led to a sharp drop in declaration,” the mid-year report noted.
Closer monitoring of and enforcement within the industry along with full operationalisation of the Aurora Gold Mine is anticipated to help gold declarations improve to 390,000 ounces at the end of 2015 compared to 387,508 ounces in 2014.
The bauxite industry has also seen a decline in international prices which has contributed to an 18.6 percent decline in production during the first half of the year. “Production in the bauxite industry is expected to increase to 1,635,081 tonnes as compared to 1,563,563 tonnes in 2014, an increase of 4.6 percent.
The decline in the production of stone the report added, resulted from a reduction in construction activities. “Despite the contraction of the other mining and quarrying industry, in the first half of 2015, output is expected to grow by 5.8 percent this year due to expansion in quarrying production in the second half of the year. This is as a result of an expected increase in construction, occasioned by accelerated implementation of the public sector investment programme (PSIP) and increased investment by the private sector.
“Manufacturing output increased by 7.1 percent,” due to a 15.3 percent increase in rice milling as a result of the bumper first crop. Sugar and “other manufacturing” increased by 1.6 percent and 2.7 percent, respectively.
“Increases in the pharmaceutical industry combined with increases in the production of rum, stout and beer, aerated drinks, juices and cereals were responsible for driving other manufacturing.”
The manufacturing sector is expected to grow by 0.7 percent in 2015 as compared to 2014.
Meanwhile, the services sector continued to expand in the first half of 2015, growing by 2.5 percent. This was due to expansion in all sub-sectors, except construction. “Significant growth occurred in transport and storage, financial and insurance and information and communication subsectors, recording 12 percent, 6.7 percent and 6 percent respectively.”
The services sector is projected to grow by 3.6 percent in 2015.