–non-oil economy records 4.8 per cent growth despite floods, pandemic

GUYANA has recorded real Gross Domestic Product (GDP) growth of 14.5 per cent, and a growth of 4.8 per cent in the non-oil economy during the first half of this year, despite being faced with challenges created by the COVID-19 pandemic, and the devastating floods experienced from May to July.

Due to the unprecedented floods, which impacted particularly the agriculture, forestry and mining sectors, along with the lingering effects of the COVID-19 pandemic, which will spill over into the last half of this year and even beyond, the revised full-year forecast for real GDP growth in 2021 is now 19.5 per cent overall, and 3.7 per cent for the non-oil economy.

This is according to the Ministry of Finance’s Mid-Year Report, which is expected to be tabled by Senior Minister in the Office of the President with responsibility for Finance, Dr. Ashni Singh at the first sitting of the National Assembly, once it resumes after recess.

With regard to sectoral performances, for the extractive industries, the report shows that in the first half of 2021, the mining and quarrying industries were estimated to have grown by 23.1 per cent, with higher output from the petroleum and other mining industries, despite contractions in gold and bauxite.

It was reported that total output from the petroleum sector increased by 65.4 per cent when compared to the same period last year.

With respect to diamond, sand and stone, these were estimated to have seen a total growth of 63.3 per cent, with quarry stone having a growth output of 141 per cent, sand declarations growing by 119.3 per cent as a result of increased activity in the construction sector, while diamond declarations improved with a growth of 166.3 per cent.

The outlook for the remainder of this year for other mining industries was estimated to be promising as well with an estimated growth rate of 74.5 per cent for the entire year.

With regard to manufacturing, this sector notably saw an estimated growth of 13.1 per cent when compared to the same period last year, with expansion of the sector being attributed to a growth of 23.1 per cent in other manufacturing. In the category of other manufacturing, growth was experienced in the manufacturing of non-metallic products, chemical products and beverages.

Meanwhile, the services industries were estimated to have expanded in the first half of 2021 by 9.4 per cent, when compared to the same period in 2020, as it was noted that the measures to curtail the impact of COVID-19 would have severely affected such activities last year.

Notably, the report shows that the gradual relaxation of these measures would have contributed to some growth in the sector.

STRONG PERFORMANCE
The report also noted the strong performance of the construction sector, which grew by 25.5 per cent in the first half of 2021, reflecting increased emphasis on implementing the public sector investment programme, as well as increased private sector construction, reflecting improved private sector confidence and optimism regarding the economic outlook.

Unlike the sectors that recorded healthy performances, the agriculture, forestry and fishing industries, for the first half of 2021 are estimated to have contracted by 2.4 per cent compared to a decline of 4.1 per cent for the corresponding period last year. It was noted, too, that this was as a result of lower output from the other crops, sugar growing, forestry, and fishing industries.

“At the end of the first half of the year, the Guyana Sugar Corporation (GuySuCo) produced 29,650 tonnes of sugar. This performance reflects the record high levels of rainfall, which resulted in waterlogged soils, particularly at the Albion Estate, and strike action that resulted in over 5,600 man-days being lost,” the report detailed.

According to the report, the sugar industry declined by 22.4 per cent when compared to the same period in 2020.
Some of the reasons for this decline were a 30 per cent mortality of mature cane at the Albion Estate, 10 per cent at Uitvlugt, and five per cent at Blairmont due to the floods. Another 15,000 tonnes of sugar in the second crop were also expected to be lost, based on the report.

Conversely, the rice industry grew by an estimated 7.8 per cent in the first half of the year, marginally lower than the target set for the period, but ‘other crops’ declined by 7.3 per cent due to the floods.

Further, the livestock industry was estimated to have grown by 10.6 per cent when compared to the same period in 2020. However, for that same period, the fishing industry contracted by an estimated 6.6 per cent, and the forestry industry by 7.1 per cent.

BALANCE OF PAYMENTS
The Mid-Year Report noted that at the end of the first half of this year, “the overall balance of payments recorded a deficit of US$67.4 million compared with a deficit of US$2.8 million at the end of June 2020,” with the current account registering a deficit of US$39.1 million, in comparison to a deficit of US$396.5 million for the corresponding period in 2020.

This was attributed to a significant increase in the merchandise trade surplus, which moved from US$72.7 to US$813.3 million. The merchandise trade account, according to the report, improved as a result of export receipts expanding by US$786.9 million, outweighing the US$46.2 million increase in imports.

Meanwhile, the capital account has shown a deficit of US$19.6 million when compared with a surplus of US$419.7 million at the end of June 2020, attributed to outflows of US$1,713 million from private enterprises in the oil-and-gas sector, along with outflows of US$123.6 million in revenue from the petroleum sector to the Natural Resource Fund.

The report also highlighted the fact that foreign direct investment in the first half of 2021 was 41.6 per cent higher than the US$940.6 million recorded last year for the same period.

At the end of the first half of 2021, consumer prices grew by 5.6 per cent; this was largely driven by increased food prices as a result of the inclement weather, and shortages experienced following the flood.

Further, the report indicated that the bottlenecks in the global supply chain adds some measure of imported inflationary pressures. However, the report underscores that the price increases are ‘transitory’, and unlikely to have lasting long-term impact on inflation. Inflation is now projected to be in the order of 3.8 per cent for the full year.

ONE OF THE FASTEST GROWING ECONOMIES
Earlier this year, Dr. Singh had said that Guyana would be one of the fastest growing economies in terms of real GDP, and would see rapid transformation in a number of sectors, especially since the government would make efforts to boost the non-oil economy as well.

“We’re anticipating a rapid expansion in the services sector, including transport and logistics, construction of infrastructure, including roads, bridges, office buildings in the private sector, etc, along with expansion in other services such as financial services, all of which will contribute to rapid expansion in real output,” Dr. Singh had said.

“So, you’re going to see Guyana being one of the fastest growing economies in real GDP terms; globally in the hemisphere, and certainly in the Caribbean… A lot of the real GDP growth in the region will be driven by Guyana,” he’d added.

The favourable economic performance at the end of the first half of 2021 in the non-oil economy bodes well for the upcoming second half of 2021 and beyond. It is expected that advances in key investments, both in the public and the private sector, will buttress the second-half performance of the economy.