–even as region experiences slowdown in economic growth, World Bank reports

THE World Bank has said that Guyana will continue to record positive economic growth over the next two years, even as the Latin America and Caribbean region experiences a slowdown in economic progress.

According to the international financial institution in its latest publication, Global Economic Prospects, Guyana is on course to recording growth of 25 per cent this year and 21 per cent next year.

“Aside from Guyana, which remains in a natural resources-fueled growth boom, the sub-region faces renewed headwinds,” the World Bank said.
Progress in this year will continue from the successes recorded last year, when the country’s economy grew by well over 50 per cent.

Guyana’s prospects remain bright even as growth in Latin America and the Caribbean is projected to slow from an estimated 3.6 per cent in 2022 to 1.3 per cent in 2023, before recovering somewhat to 2.4 per cent in 2024.

“The forecast for 2023 has been downgraded since June by 0.6 percentage point. The sharp deceleration of growth this year reflects efforts by the region’s monetary authorities to tame inflation, and spillovers from weakening global growth. Per capita GDP growth is expected to be just 0.6 per cent in 2023,” the World Bank said.

The bank went on to say: “A sluggish growth outlook in the United States and China will curtail export demand in 2023, while the increase in U.S. interest rates is likely to also keep global financial conditions restrictive.

“The boon for South American incomes from recently elevated commodity prices is expected to unwind over the next two years, except in a small number of fossil fuel exporters. Meanwhile, weakening global growth is expected to reduce export growth in LAC from 5.9 per cent in 2022 to 3.6 per cent in 2023.”

The World Bank said domestic sources of growth appear similarly lacking. Investment is the primary driver of forecast downgrades, with negative region-wide investment growth projected in 2023 in the context of softening business confidence and increased financing costs.

“Elevated levels of domestic policy uncertainty in most of the region’s largest economies present a further headwind to investment, especially in key export industries such as mining.
“The recovery in services following the lifting of pandemic-related restrictions has also largely run its course. With prices rising faster than wages in much of the region, lower real incomes are expected to constrain consumption growth,” the financial institution said.

On a more positive side, the cycle of policy rate increases is likely coming to an end across inflation targeting economies, with solidly positive interest rates in real terms that is, adjusted for anticipated future inflation.

“Policy rates in the largest economies are expected to remain fairly stable this year, meaning inflation adjusted policy rates will increase in some economies if inflation recedes as projected,” the World Bank said.

The Inter-American Development Bank (IDB) recently commended Guyana for providing targeted assistance to lower-income groups, including the elderly, which was an important approach in microeconomic and social policies, which contributed to Guyana experiencing an inflation rate lower than what was recorded globally.

The IDB, in its “Headwinds” report, highlighted measures taken by Guyana and the other Caribbean governments to stem inflation and assist their economies to grow, despite external shocks and higher commodity prices on the world market.

“One important approach is to provide additional, targeted assistance to lower-income groups, including the elderly. For example, in Guyana, the government’s public assistance payments for vulnerable groups were increased from US$57 to US$67 per month, benefitting approximately 18,000 people. The Old Age Pension Programme, which benefits approximately 65,000 senior citizens, also provided a series of increases that raised the monthly payment from US$98 in 2020 to US$134 in 2022,” the report noted.

Moreover, at the micro level, to support productive sectors and vulnerable populations, the government introduced several policies.

“The excise tax on petroleum was reduced from 20 to 10 per cent in January, then reduced further to zero in March. Tariffs on public utility services such as water and electricity have remained fixed, with the government absorbing higher operating costs. In addition, US$4.8 million was allocated for the purchase and distribution of fertiliser for farmers to reduce operating costs, and US$3.8 million was distributed in the form of one-time cash grants for households in the rural interior and riverain communities (US$120 per household),” the report noted.

According to the report, rising inflation was “imported” from commodity-price inflation that was due to external shocks, including the war in Ukraine, higher oil prices which resulted in higher fuel prices, disrupted supply chains and the COVID-19 recovery period.