Local ‘non-oil economy’ shrunk by 4.9% at mid-year
Vice-President, Bharrat Jagdeo
Vice-President, Bharrat Jagdeo

— gov’t working to reverse the decline, avoid projected -3% yearend growth

 

By Navendra Seoraj
GUYANA’S ‘non-oil’ economy was unable to withstand external and internal shocks caused by the Novel Coronavirus (COVID-19) pandemic and a protracted electoral process, but the newly-elected People’s Progress Party/Civic (PPP/C) government is looking to mitigate the potential impacts and reverse the decline of 4.9 per cent, which was recorded at mid-year.

Coming off of a good run in 2019, with recorded economic growth of 4.7 per cent, Guyana’s continued progression and transformation was inevitably halted by the COVID-19 pandemic, which has so far infected about 674 persons and killed 22 locally.

The necessary restrictions in place to curtail the spread of the disease, as seen in countries across the world, has “slowed down” the economy because businesses either reduced their productive hours or are closed indefinitely, and the public sector has also scaled down its operations for the time being.

Unlike other countries, Guyana was faced with the effects of a protracted electoral process which started on March 2, 2020 and ended only on August 2, 2020.
In presenting quantitative data on the performance of the country, Vice- President, Bharrat Jagdeo, said the oil economy grew by 45.9 per cent, but the non-oil economy, which comprises the traditional, labour intensive sectors, shrunk by 4.9 per cent in the first half of the year.

“If you take out oil and gas, economic activities shrunk by nearly five per cent for the first half of the year… this shows that these sectors require a lot of help, in order to resume positive growth,” said Jagdeo during a press briefing on Friday.

The sectors, which were affected, have the greatest linkages to other sectors and they are labour intensive, said the vice-president.
In disaggregating the impact on the various sectors, he said wholesale and retail trade shrunk by 14 per cent; transport shrunk by 25 per cent; accommodation, 33 per cent; bauxite, 42 per cent; and other mining, 57 per cent. Other sectors such as forestry and fisheries also registered a significant decline, in the first half of the year.
On the positive side, it was reported that there was a 13 per cent increase in export of non-traditional agricultural commodities in the first half of 2020 when compared to its corresponding period January to June 2019, amidst the COIVD -19 pandemic.

For the period January to June 2020, a total of 5,160 metric tonnes of non-traditional agricultural commodities valued at GY$1.3 billion or US$6 million were exported from Guyana. This represents a 13 per cent increase when compared to the same period in 2019.

NOT ENOUGH
This, however, was not enough to cushion the external and internal shocks, which affected other aspects of the non-oil economy.
“We are working to stop this decline and even reverse it in the non-oil economy,” said Jagdeo, adding that government is examining a number of measures, which could be employed to reverse the decline.

Among the measures being considered is the increase of working capital for banks and businesses, and other direct help to the private sector, as well as a stimulus for the economy.

“This is the reality right now, and as you can see, it would require a series of measures in the new budget to see these sectors resume growth,” said Jagdeo.
Guyana is already eight months into 2020, but the protracted electoral process had restricted the country from having a budget and a clear plan for the year, something which the newly-elected government is working to fix in just 21 days.

Crafting a national budget usually takes 179 days; however, extraordinary circumstances have forced government to condense this process and present a budget in 21 days, said Jagdeo.

“It takes 179 days to prepare a budget from the date the circular goes out to the date of presentation in Parliament… but we want the budget prepared and we are working towards preparing a budget in 21 days,” said Jagdeo, adding that the budget needs to be crafted urgently.

Jagdeo said government is working overtime to get the budget ready within this short space of time, as a speedy completion is important because of the existing socio-economic challenges caused by the novel coronavirus (COVID-19) pandemic.

As it is now, Guyana is projected to record -3 per cent economic growth at the end of the year, but Jagdeo said government has to work through the numbers because the growth rate is sensitive to policies.

“Therefore, policy measures and the lag between policy and response will have an implication on the final number… but, by budget time that number should be finalised,” said Jagdeo.

The urgent need for the passage of a budget was recently highlighted by Head of the Department of Economics at the University of Guyana, Sydney Armstrong, who believes that the swift passage of a national budget would create some traction and stability for the economy.
“There is the need for President Ali and his team to swiftly pass a budget for 2020 so as to create some traction for this economy in this difficult time, and at the same time think about Budget 2021,” the economist told the Guyana Chronicle, in a recent interview.

PEOPLE-FOCUSED
Armstrong strongly advised that the proposed budget be “people-focused”, and especially give priority to vulnerable groups.
He feels that essentially, it should focus on such key sectors as health, education, agriculture, infrastructure and industries, all of which should be inextricably linked to the new Oil-and-Gas Sector, which should be its central feature.

“As a nation, we are at a defining moment, given the development of our Oil-and-Gas Sector,” Armstrong said, “but it is also important to note that the road up ahead is still going to be challenging, given that we are still in a global pandemic.”
Considering the economic situation and the instability caused by COVID-19, the economist said there is need for a “stimulus package”, as this would ease the “economic hardship” faced by vulnerable groups in society.

But, the new administration has “hit the ground running” and, according to newly-elected President, Dr. Irfaan Ali, his government is working to secure $4.5B as emergency response to help at the household level.

“We have reached out to several multilateral and bilateral sources with a view to urgently mobilise financial resources of the magnitude that is necessary to overcome the effects of this pandemic. I must say the response has been encouraging,” said Dr. Ali.

To further ease the strain on persons, government had met with the governor of the Central Bank and directed him to extend regulatory permission so as to allow for bankers to continue extending moratoriums.

Government has also looked at the possibility of adjusting the “reserve requirement” which will allow the banks to have more disposable resources and tie that adjustment with lower interest rates.

“We have started to examine, from a fiscal perspective, what support we can give to the private sector and other groups all with the view of supporting a resumption of the economic activities and putting people back to work.

“Every life in our nation matters and my Government will ensure that every life is protected from harm. The COVID-19 pandemic has already claimed too many lives. Everything possible must be done to protect our people from this dreaded and dreadful disease,” said President Ali.

SHARE THIS ARTICLE :
Facebook
Twitter
WhatsApp

Leave a Comment

Your email address will not be published. Required fields are marked *

All our printed editions are available online
emblem3
Subscribe to the Guyana Chronicle.
Sign up to receive news and updates.
We respect your privacy.