By Rawle Lucas

THE Guyana economy entered its 11th year of continuous growth, with gold as its leading foreign exchange earner, the oil and gas industry joining the ranks of its production structure, and foreign investment in the construction and real estate industries set to expand rapidly.  A future of continuous growth and the personal upliftment of the people of Guyana in 2020, and beyond, are things that the Granger administration had in store for the Guyanese people with his Decade of Development in hand.  Earlier, the International Monetary Fund (IMF) had projected that the Guyana economy would grow by 86% in 2020, making the promise of continued prosperity look possible and bright.  Work on bringing greater wellbeing to the people of Guyana has been stalled by the undeclared elections.

The brisk start to the economy in the first quarter of 2020, with revenues from first oil reaching Guyana’s bank account and foreign investment projects being launched, was dealt a significant blow also by the unanticipated arrival of the deadly Corona Virus.  By the time the first known case of the deadly disease, called COVID-19, had arrived in Guyana, the World Health Organization (WHO) had already deemed its outbreak a pandemic and major economies around the world had begun to suffer significant deaths and shutter operations.  The disease seemed to be spreading like wildfire wherever it landed and the only practical way of containing it was to limit person-to-person interactions and urge the practice of proper hygiene.  Countries, including Guyana, decided to close their borders to stop people from entering their geographic space.  Not knowing who in the country already had the disease, the Government restricted the movement of people within the country using stay-at-home orders.  Where movement and interaction among people were necessary, Government also called for the practice of social distancing.  These physical policy measures resulted in the involuntary closure, presumably temporarily, of many businesses in the domestic economy.  Only essential services like communications, security, water, electricity, health, transportation and food supply have been permitted in Guyana with severe restrictions around them.

Like the rest of the world, Guyana is facing a disruption to its economy that did not originate from the usual source, the bursting of an asset bubble or a prolonged slump in the business cycle.  It was self-inflicted for good reason.  The defensive actions of the country have altered the economic and financial prospects of many people and businesses in Guyana.  Guyana gets nearly all of its gross domestic product or GDP from international trade.  Over 70 percent of that is realized from four markets, namely Canada, CARICOM, the EU and the USA.  As much as 78 percent of the country’s imports is made up of capital and intermediate consumption goods that are used to produce goods that Guyanese consume or export.  These imported goods come from countries like Japan, South Korea, the UK, China.  With the economies of those countries badly affected by the pandemic and Guyana having to join the rest of the world to restrict international travel, one could easily see how the usually open economy and the people that depend on it could encounter adverse conditions.

In the face of this reality and the continued uncertainty as to when global production will resume in full, the international financial institutions continue to project high levels of growth for Guyana.  A most recent estimate of growth in GDP of over 51 percent was articulated by the World Bank for 2020.  The substantial growth projections about the economy hinge on the emphasis that is placed on gold as a store of value asset, on oil prices and the performance of the latter industry.  Gold prices have shown a marked increase rising by 12 percent over where it was at the start of the year.  However, gold prices have not been able to maintain a positive trend as a result of the uncertainties in the capital markets and doubts about sustainable demand in the two biggest markets, China and India, for the metal.

In contrast, oil prices slumped considerably as a result of the price war that was waged between Russia and Saudi Arabia.  That price war and the effect that it will have on Guyana’s GDP are reminders that Guyana continues to be a price taker in the products that it exports and its economic growth remains in the hands of others.  How well the economy will do in 2020, therefore, is highly dependent on how fast Guyana contains the Covid-19 disease and the speed with which our major trading partners become fully operational during the course of this year.  Comments coming out of the major economies in Asia, Europe and North America do not offer much hope for a return to full operation or recovery for the rest of this year.  Further, the price of oil is expected to remain relatively low as oil consumption is down an estimated 35 percent as a result of the widespread global defence against the coronavirus.  Oil prices were likely to go lower with the sight of bankruptcies appearing on the horizon of the US economy, the largest economy in the world.  The setback in the oil industry must be a reminder to Guyanese that all that glitters is not gold and the habit of counting one’s chickens before they hatch was never a good one.  Just like that, the phenomenal economic growth expected for Guyana is in jeopardy.  The hope for the country at this point is for oil prices to rise quickly above Guyana’s breakeven point.  While we wait for that to happen, the challenge that remains is how to help the Guyanese people in this radically altered economic environment.

The severity of the crisis will not be known for some time.  What is known already is that people have lost income because of the mandatory lockdown policies that have curtailed pavement vending, school-perimeter vending, and air, road and water payloads.  Social distancing has virtually paralyzed the tourism, hospitality and entertainment industries.  One estimate given about the hire car industry is that demand is down about 70 percent.  Only taxi services with contracts are earning some money.  Incoming air cargo volumes are estimated to be down close to 40 percent.  Fuel consumption too, another useful indicator of economic volume, is also estimated to be down close to 40 percent since COVID-19.  Seaport traffic remains high, but one expects to see a decline as idle businesses see a build-up of their inventories and no need to replenish them with the customary regularity.  Cellphone usage could also be taking a hit as people reorder their priorities in the face of lost revenues and possibly dwindling savings.  The combined impact is a decline in national welfare.

The question then becomes how do we address this issue?  Keynesian economic thinking has already been taken off the table by virtue of the health risks and the parliamentary straightjacket in which the country finds itself.  It must be said that if there is an authority to stop Guyanese from going about their daily lives, then there must be one to help them get through this crisis.  Government has stepped forward to ease the financial burden on consumers by removing the value-added tax or VAT from products essential to the fight against COVID-19 and to daily living.  Many businesses have already granted various sorts of relief and support to their staff and customers.  Some businesses have agreed to pay their staff between 60 to 90 percent of their current salary.  The issue is how long can they keep that up in the face of falling demand and declining cashflows.  So, when the paycheck stops or it is cut further, what is next for affected breadwinners?

It should be clear that under the current circumstances Guyana is facing a national emergency.

The more that Guyanese adhere to the stay-at-home and social distancing policies, the faster the economy can be reopened.  That is good for our health, but not the current and impending economic struggle of Guyanese.   In this highly contentious and combative period of intense political rivalry in Guyana, there is the temptation to eschew cooperation and collaboration in favour of partisan interests.  Great leaders know that at some point the condition of their people and their institutions ought to take centre stage when threatened by a common enemy.  At this time in Guyana, a conversation between all stakeholders is needed, if only to make sure that the health and financial threats facing the Guyanese people are contained.

The search for any effective solution has to include the private sector, especially those with deep pockets, plenty compassion and a lot of faith in this country.    Even with the uncertainty as to when the economy will be reopened, it might be possible for large incorporated businesses to support their staff for longer than most.  They might also be able to support a wider national effort that distinguishes the need for help by the severity of people’s vulnerability, in other words treatment by triage.   It would involve calling on them to touch their sacred cow, their accumulated capital in exchange for a future promise of monetary and fiscal benefits.  Below is a perspective as to the capacity of large corporations to help in this situation.  The combined cumulative retained earnings in 2018 of six such corporations in Guyana was equivalent to 15 percent of the country’s GDP, 40 percent of the private sector deposits in the banks and 65 percent of the country’s 2018 money supply.  With only six entities considered, that is a small estimate of the capacity of the private sector to help.  The details of the engagement are beyond this article.  For the private sector to move in that direction, there must be a quid pro quo from the public sector side which could be honoured in the near future.  To get there, one would need all relevant political groups to be involved in fashioning a solution whose short-term obligation can be implemented by any government of this country.