— with the commencement of oil production, says IMF

A VISITING team from the International Monetary Fund (IMF) has concluded that Guyana’s economy became more broad-based in 2017 and has projected that for 2018, growth is expected due to the strengthening of the rice, construction and gold mining sectors.
It concluded too that production of oil in 2020 will be a turning point for the country’s economy.

“Economic growth slowed in 2017, but became more broad-based. Real GDP grew by 2.1 per cent, down from 3.4 per cent in 2016, on account of weaker than expected mining output and weak performance in the sugar sector. Nonetheless, non-mining growth rebounded to 4.1 per cent following a contraction in 2016,” the statement said.
According to the statement, construction expanded significantly, buoyed by higher public and private investments, and rice production recovered from weather-related shocks in the previous year.

“In 2018, the mission projects real economic growth of 3.4 per cent, driven by continued strength in the construction and rice sectors, and a recovery in gold mining,” the statement said.

It said that weaker than expected export growth and higher oil prices contributed to the current account balance turning negative.

“In 2017, the current account recorded a deficit of 6.7 per cent of GDP from a 0.4 per cent surplus in 2016. That deficit was largely financed by Foreign Direct Investment (FDI), particularly in the oil and gas sector, and higher loan disbursements to the public sector. Reserves stood at 3.2 months of imports, and the mission projects it to remain around that level in 2018–19,” the statement said.

IMPROVEMENTS IN TAX ADMINISTRATION
It also noted that the fiscal deficit remained stable in 2017.
“The central government deficit was 4.5 per cent of GDP, lower than the budgeted 5.6 per cent. This better than expected outturn was largely supported by higher revenue arising from improvements in tax administration,” it said.

Further, the banks said that in 2018, the deficit is projected to widen to 5.4 per cent of GDP “due to the cost of restructuring the sugar industry, including severance payments to displaced workers, as well as an increase in infrastructure- related capital expenditure”.
Noting that Guyana’s medium-term prospects are favourable, the statement said the commencement of oil production in 2020 will be a turning point.

“The main direct effect on the domestic economy will be through higher fiscal revenue, and spillovers to supporting activities,” the statement said.
It noted that the balance of payments will swing sharply to positive after 2020 and that oil revenue will significantly improve the fiscal outlook, and is expected to place the public debt on a downward trajectory.

“The mission welcomed the progress made on establishing a comprehensive fiscal framework for managing oil wealth. Debt sustainability concerns are attenuated by future oil revenues, but the financing of short-term deficits should be carefully managed,” the IMF said.

The bank said infrastructure bottlenecks and high energy costs remain obstacles to growth. It said too that notwithstanding significant upside benefits, the prospect of revenue from the oil sector “could lead to real exchange rate appreciation, eroding competitiveness in some sectors”.

It called on the government to put in place regulatory and administrative measures to reduce the relatively high cost of doing business in Guyana.

The staff team from the International Monetary Fund (IMF), led by Marcos Chamon, visited Georgetown during April 23–May 3 and met with Minister of Finance Winston Jordan; Minister of Natural Resources Raphael Trotman; Central Bank Governor, Dr Gobind Ganga; representatives from the private sector, the Opposition, labour unions, and other stakeholders.