– Guyana’s thriving economy relies on private sector growth

IN Guyana, President Dr. Irfaan Ali and his government have been at the forefront of driving economic growth, particularly through the expansion of the oil industry as the International Monetary Fund (IMF) projects continued economic boom for Guyana with 37.2 per cent GDP Growth in 2023.

According to the IMF, the country’s GDP experienced unprecedented growth in 2022, reaching a record high of 62.3 per cent, with the non-oil sector expanding by 11.5per cent.

The positive outlook continues, with projections of GDP growth at 37.2per cent and non-oil economy growth at 7.9per cent in 2023, as oil production increases, with two additional floating, production, storage, and offloading (FPSO) vessels expected to come online in 2023 and 2025,

Guyana’s economic prospects have led the IMF to raise its GDP growth estimates for the country from 18.5per cent to 40.0per cent for the period of 2022-2026.

Amidst this economic boom, IDB’s Caribbean Economics Quarterly highlights the importance of private sector development in Guyana.

The report indicates that there are significant opportunities for private sector growth, driven not only by the positive spillovers from the oil and gas industry but also by increased government spending on infrastructure.

Sectors such as construction, transportation, logistics, hospitality, technology, and business services are poised to benefit, necessitating a business-friendly environment to facilitate this growth.

However, the report also sheds light on the obstacles faced by businesses in Guyana. Based on the 2020 Firm Performance and Gender (IFPG) Survey conducted across 13 Caribbean countries, Guyana’s private sector identified several major challenges to doing business. Electricity, tax rates, skilled labour, collateral requirements for loans, interest rates on loans, and customs and trade regulations were among the top obstacles. Notably, 64per cent of firms cited electricity as a major or severe obstacle, while 47per cent cited customs and trade regulations. In comparison, electricity was a challenge for 49per cent of firms in the broader Caribbean region.

The report reveals that some obstacles have become more pronounced in recent years. Comparing the 2020 survey results to those of 2014, a larger share of firms identified electricity, tax rates, skilled workers, collateral requirements, interest rates, customs and trade, and land as major and severe obstacles.

The surge in economic activity and capital inflows has increased the demand for credit and skilled workers, while access to land has become more challenging due to rising property values.

Connectivity services also play a crucial role in the business landscape. In terms of power interruptions, Guyana reported a higher share of firms experiencing such interruptions compared to the Caribbean average.

However, fewer firms in Guyana reported mobile and internet service interruptions compared to the regional average. While improvements have been made in the electricity supply, Guyana still faces the highest number of reported power outages per month across Caribbean countries. Nonetheless, the average length of outages in Guyana was relatively better than the regional average.

Recognising the importance of private sector development, the Guyanese government has outlined initiatives in its Low Carbon Development Strategy 2030 (LCDS). The strategy emphasises the need to diversify the energy matrix, transition to cleaner energy sources, and reduce electricity costs. Key projects, such as the gas-to-shore project, aim to lower electricity costs and support private sector growth by utilising natural gas and renewable energy sources.

Additionally, plans are in place to construct solar power plants in various regions and develop hydroelectric power plants near the Brazilian border, funded in part by the Government of Norway.

As Guyana’s economy continues to thrive, private sector growth remains a crucial driver of sustainable development. Addressing the identified obstacles, such as electricity supply, tax rates, and skilled labour, will be vital for creating a conducive environment that enables businesses to seize the growing opportunities in the country. With the government’s commitment to infrastructure development and renewable energy projects, Guyana is positioning itself to further enhance the business climate and support the expansion of the private sector.