1. NS4540 Winter Term 2019 Guyana Economy
Federal Reserve Bank of Chicago, Strong Dollar Weak Dollar

2. Guyana Overview
Country rich in natural resources yet one of the poorest nation in western hemisphere
121 out of 187 countries in the Human Development Index
Per capita income US$3,748 also lowest in region and 21% below next lowest Belize
Population of 747,884 mainly along the coast with the interior almost uninhabited
2002 to 2012 outmigration of 124,800 mainly to North America
Severe economic crisis in late 1970s and 1980s accompanied by
a rapid deterioration in public services, infrastructure and quality of life
Basic consumer goods unavailable except on the black market and
Real wages in steep decline

3. Guyana: Governance Trends

4. Guyana Economy I
A period of rapid growth in the 1990s, followed by almost 20 years of relative stagnation
After years of state-dominated economy international pressure forced country to launch in 1987 an Economic Recovery Program incorporating market-oriented reforms and liberalization
Move towards an open economy continued after free elections in 1992
average annual growth reached 7%
Reforms
Removed most price controls
reduced state’s role in economy
Encouraged foreign investment
Enabled country to service foreign debt and
Large scale privatizations of state-owned businesses

5. Guyana Economy II In addition In addition to the 7% annual growth rate
Laws regarding mining and petroleum exploration were improved and
An investment policy receptive to foreign investment was announced.
In addition to the 7% annual growth rate
Inflation declined to single digits from 1995 and
The currency stabilized while
Fiscal and external imbalances were reduced
However by 1998 the recovery was exhausted and the effects of long-run structural vulnerabilities became apparent
Also Investor confidence was damaged by political disturbances following the 1997 election

6. Guyana Economy III Growth was also hindered by
A lack of private sector activity
The ongoing migration of professionals to North America
Problems with the implementation of structural reforms
While financial stability was broadly maintained
Annual growth averaged 0.3% from
Economy contracted in four of these eight years
In early 2005 extensive flooding in the coastal areas were most of the population live caused considerable damage
Sugar and rice production was badly affected
GDP contracted by 2%

7. Guyana Economy IV
Emerging from this unpromising environment, economy made a recovery in 2006 (5.1%) and 2007 (5.4%)
Guyana qualified for an additional US $189m under the Multilateral Debt Relief Initiative in 2006
Following debt relief of $585m under the Enhanced Heavily Indebted Poor Countries (HIPC) Initiative in 2003
GDP slowed to 3.1% in 2008 and averaged 4.5% , reaching 5.2%in 2013 largely due to higher gold prices
Growth slackened to 3.9% partly because of lower gold prices

8. Guyana Economy V Indications of structural problems became apparent
Central Government’s overall financial deficit was equivalent to 5.5% of GDP in 2014 – increase from 3.5% in 2005
IMF: country needed fiscal consolidation and structural reforms to strengthen debt sustainability

9. Outlook I
Coalition Government that took office in May 2015 faced multiple economic challenges
uncertainty over international gold prices and
weak outlook for bauxite, sugar and some other basic industries
Country had slow growth but maintained macroeconomic stability as the result of
Recent debt forgiveness as well as
Continuing development assistance due to good relations with major aid donors
Continuing forward commitments for grants and loan assistance from IDB, the EU and other agencies as well as from Petrocaribe

10. Outlook II However economic base remains narrow
Four commodities make up bulk of export revenue and
Gold alone providing more than 40%
Situation leaves Guyana vulnerable to price fluctuations and weather-related risks
Large scale mining investments appear to be on hold due to uncertain commodity prices
U.S. Department of State has also noted a clear influence of drugs-transshipment on the economy – extent unclear
Sugar industry has only a fair prospect for survival
Ending of the EU sugar protocol and
Scheduled removal in 2017 of sugar quotas from traditional importers

11. Outlook III For the future continuing need to address
Issues of management efficiency,
Transparency and
Good governance.
Coalition government elected in 2015 will need to address
Political polarization and
Lack of trust
Both have severely harmed country’s ability to make progress with large-scale investment projects

12. Forecast I
The government which has a slim one-seat majority will make little progress in unifying a divided political scene
The oil discoveries in 2016 have significantly altered the country’s finances
The public sector deficit will widen substantially to an average of 6.9% of GDP in as the government ramps up infrastructure spending
Public debt levels will remain high as a result reaching 58.2% of GDP by 2019
GDP growth should accelerate modestly in owing to
investment in gold mining
new major offshore oil finds and
Public spending increases

13. Forecast II