WITH the objective to build a platform to put the economy on a higher growth path to enable the “Good Life”, the Government on Friday presented a $230B budget and has projected the economy to grow by 4.4 per cent this year.The Administration, last year, had forecast a 3.4 per cent economic growth, but fell short of this target, registering a growth of 3 per cent. Presenting his second budget, themed “Stimulating Growth, Restoring Confidence: The Good Life Beckons”, Finance Minister Winston Jordan told the House that 2015 was perhaps the most challenging year yet.

“All of the country’s key industries — sugar, rice, bauxite, gold and forestry — found themselves in various states of distress. Even remittances, which have contributed significantly to income, consumption, investment and employment, and upon which so many of our people depend, was a victim of the slowdown in the world economy,” he said.

The Minister contended that Guyana’s excessive reliance on these generators of foreign exchange will continue to expose the economy to volatile external developments.

“It is a tribute to this young Government’s prudent management of the economy — including timely policy interventions — that the economy’s growth trajectory continued; that there were no reported job losses; and, as was evident in the last two months of 2015, the business community’s confidence had been restored.”

Guyana was not the only country to experience an economic slowdown. According to The World Economic Outlook, global economic growth in 2015 contracted to 3.1 per cent. Growth in advanced economies was estimated at 2 per cent, slightly better than in 2014.

Minister Jordan told the House that factors responsible for this outcome included modest recovery in the Euro Area, positive growth in Japan, declining oil prices, an accommodative monetary policy and, to some extent, depreciating exchange rates.

While emerging from a disruptive 2015, Minister Jordan said, 2016 will be a year of recovery, a platform to put the economy on a higher growth path to realise the “good life”. The economy is projected to grow by 4.4 per cent, but non-sugar growth is projected at 4.3 per cent.

FIVE PILLARS
This year’s budget, Minister Jordan said, is anchored on the five pillars outlined by President David Granger’s New Year’s Speech. These are National Unity, National Infrastructure, National Institutions, National Security, and Public Services. And it includes a raft of measures to give the citizenry an opportunity to enjoy the envisioned “Good Life”. Among them are the removal of excise tax on motor vehicles under four years old and below 1500cc; reduction of excise tax from 50 per cent to 10 per cent on motor vehicles under four years old and between 1500cc and under 2000cc; income earned by artistes during festivities, certified by the minister responsible for tourism, is to be exempted from the payment of income tax; Old Aged Pension and Public Assistance are to be increased; rebates granted by GPL are to be increased; the prices of fuels are to be reduced; and the income tax threshold is to be increased to $660,000 from $600,000, directly benefiting some 68,000 workers.

AGRICULTURE
Much, he said, is in store for 2016. While the agriculture, fishing and forestry sector is projected to grow marginally by 0.3 per cent, given its encouraging performance in 2015, sugar production is targeted to grow by 4.8 per cent to 242,287 metric tonnes. Not unexpectedly, the projection for rice output has been tempered, as the industry continues its efforts to synchronise production and existing stocks with domestic consumption and external markets.

As a result, production is expected to decline by 8.4 per cent from the 2015 level to 630,028 metric tonnes, Minister Jordan said.

The other crops sub-sector, he said, is anticipated to grow by a further 2.5 per cent, and Livestock by 0.5 per cent. For the first time since 2012, the fisheries sub-sector is expected to record increase in output, growing by a modest 1.5 per cent. This sub-sector will require greater policy and management intervention if it is to realise its potential, Minister Jordan told the House.

The forestry sub-sector is estimated to grow by 2.5 per cent, with an output of 392,469 cubic metres of timber harvested. The mining and quarrying sub-sector is targeted to improve by 16.6 per cent.

DRIVEN BY GOLD
“Once again, this growth will be driven by gold, whose output is conservatively estimated to increase by 22 per cent to 550,000 ounces. Other mining (sand and stone) is targeted to improve by 4.4 per cent, with the predictable upsurge in construction activities. As the bauxite industry continues to struggle with reorganisation and soft prices on the world market, production is expected to be maintained at just the 2015 level of 1,526,467 metric tonnes,” Mr Jordan said.

He noted that, in spite of the targeted growth in sugar and light manufacturing, the manufacturing sector is projected to decline by 0.7 per cent as a consequence of the scaling back of rice production.

The services sector is expected to grow by 4 per cent, with projected growth in the construction sector of 10.5 per cent, following a lacklustre performance in 2015.

MONETARY POLICY AND INFLATION
With the predicted increase in growth in almost all sectors during 2016, the level of inflation is expected to be approximately 2 per cent. Minister Jordan pointed out that notwithstanding the projected expansion in the economy, in 2016, the overall balance of the balance of payments is expected to improve considerably to a surplus of US$46.26M, from a deficit of US$107.68M in 2015. This improvement is premised on positive turnarounds in the current and capital accounts. The deficit on the current account, he said, is projected to improve by 19 per cent to US$116.86M.

Merchandise exports are expected to earn US$1.2B, a small increase of 2.5 per cent. Merchandise imports are projected to rise by 2.7 per cent to US$1.5B.
Net services are projected to fall from US$255.8M to US$237.4M, principally on account of a reduction in net non-factor services. After falling in 2015, transfer payments are targeted to rise by 4.9 per cent.

The capital account is anticipated to grow appreciably to US$163.1M from US$71.5M in 2015.

$173B IN REVENUE
According to Minister Jordan, Central Government’s current revenue is projected at $173.3B for 2016, an increase of 7.2 per cent. “This growth will be driven by the expected buoyancy of tax revenue arising from tax efficiency, enforcement and administration measures that will be announced later. As a result, tax revenue is projected to increase by $7.6B, or 5.3 per cent, while non-tax revenue is estimated to grow by $4B, or 21.7 per cent. Value added and income taxes are projected to grow by 9.9 per cent and 5.3 per cent respectively. The higher revenue from VAT will be as a result of closer scrutiny of import declarations, domestic manufacture and trading activities. Similarly, income tax compliance, especially among the self-employed, is expected to rise due to greater enforcement by the GRA. Both customs and excise taxes are expected grow by 6.8 per cent and 0.7 per cent respectively,” he said.

Last year, Government started the gradually transfer of the accumulated funds from statutory agencies such as the Guyana Geology and Mines Commission (GGMC) and the National Frequency Management Unit (NFMU) to the Consolidated Fund. This process, Minister Jordan said, will continue in 2016 with a total of $8.7B estimated to be transferred to the Consolidated Fund. Royalty revenues are expected to amount to $3.9 Billion in 2016, based on the projected output of Guyana Goldfields Inc and Troy Resources Inc.

He said total expenditure is expected to increase to $223.3B, or 25.2 per cent. This higher expenditure level will result from a significant growth of 70.2 per cent in capital expenditure consequent upon the implementation of several new projects that will aid in propelling economic growth.

Personal emoluments, other goods and services, and transfer payments will increase by 11.8 per cent, 10.5 per cent and 25.1 per cent respectively. A small increase of 4.6 per cent has been budgeted for interest payments.

The Finance Minister also noted that Central Government’s deficit is projected at 4.7 per cent of GDP in 2016.

“While this is higher relative to the previous year, it is lower than the 2014 ratio. Mr Speaker, to repeat, this administration aims to promote robust economic growth in the context of a prudent fiscal policy, and this deficit-to-GDP ratio is in keeping with this goal,” Minister Jordan said.

The overall deficit of the Public Enterprises is projected at $5B, mainly driven by significantly higher capital expenditure, while the overall deficit of the non-financial public sector is targeted at $38.2B, or 5.5 per cent of GDP.

By Tajeram Mohabir