The International Monetary Fund (IMF) has projected that Guyana’s economy will grow 2.6% this year, two percent less than what was forecasted by Finance Minister Dr Ashni Singh in his 2009 budget presentation.
Dr. Singh in February had projected a real growth in Gross Domestic Product (GDP) this year of 4.7% and an inflation rate of 5.2%. The IMF’s figures were presented in its April 2009 World Economic Outlook (WEO). The WEO presents the IMF staff’s analysis and projections of economic developments at the global level, in major country groups and in many individual countries. It focuses on major economic policy issues as well as on the analysis of economic developments and prospects.
It is usually prepared twice a year, as documentation for meetings of the IMF and Financial Committee, and forms the main instrument of the IMF’s global surveillance activities.
In relation to Guyana, it further projected growth of 3.4% next year while inflation is forecasted at 3.6% and 5% for this year and next year respectively. Other developing economies in the region that are expected to grow include Peru, Panama, Suriname and Bolivia with figures of 3.5%, 3%, 2.8% and 2.2% for 2009 respectively. Other countries have more modest growth rates while other economies are forecast to contract.
The report said that global activity is projected to contract by 1.3 percent this year and this represents the deepest post–World War II recession by far. “Moreover, the downturn is truly global: output per capita is projected to decline in countries representing three-quarters of the global economy. Growth is projected to reemerge in 2010, but at 1.9 percent it would be sluggish relative to past recoveries,” the report said.
It noted that the projections are based on an assessment that financial market stabilization will take longer than previously envisaged, even with strong efforts by policymakers. “Thus, financial conditions in the mature markets are projected to improve only slowly, as insolvency concerns are diminished by greater clarity over losses on bad assets and injections of public capital, and counterparty risks and market volatility are reduced”.
It added “the current outlook is exceptionally uncertain, with risks still weighing on the downside. A key concern is that policies may be insufficient to arrest the negative feedback between deteriorating financial conditions and weakening economies in the face of limited public support for policy actions”.
Meantime, the report noted, as in the other emerging regions, financial sector stress and deleveraging in advanced economies are raising borrowing costs and reducing capital inflows across Latin America and the Caribbean.
In addition, the decline in commodity prices is pounding large economies in the region—Argentina, Brazil, Chile, Mexico, and Venezuela while the economic slump in advanced economies — especially the United States, the region’s largest trading partner — is depressing external demand and lowering revenues from exports, tourism, and remittances.
The IMF said that considering the very challenging external environment, most countries in the region are weathering the storm well relative to earlier experiences with global turbulence, thanks to improvements in policy frameworks and balance sheet positions.
“Nonetheless, real GDP is forecast to contract by 1½ percent in 2009, before staging a modest recovery in 2010”, it stated. It added that as output gaps widen, inflation pressures are expected to subside and for the region as a whole, inflation is projected to decline from 8 percent in 2008 to about 6½ percent in 2009.
Meantime, the Government Information Agency (GINA) in a statement quoted the Finance Minister as stating “we believe that our domestic policy has provided us with some amount of cushion but our economy will inevitably face the consequences of what is going on globally. We remain, as a government, firmly committed to preserving and maintaining an appropriate policy environment that will lend itself to a minimizing of the effects that might emerge from the external environment”.
