Guyana’s economy de-clined by 2.5% in the first half of 2015 when compared with the same period in 2014, according to the Ministry of Finance’s Mid-Year Report but Minister Winston Jordan is optimistic of a recovery by the end of the year.
The mid-year report, which is due to be tabled in the National Assembly on Thursday, stated that the country recorded real Gross Domestic Product (GDP) growth of 0.7% in the first half of 2015, with non-sugar GDP recording a growth rate of 0.8%, the Government Information Agency (GINA) reported yesterday. It noted that at the time of the preparation of this year’s national budget, the country’s half year growth rate had been estimated at 0.9%. The economy had recorded overall growth of 3.2% in real GDP in the first half of 2014, with non-sugar GDP growing by 2%.
This year’s decline, the report said, was mainly driven by the delay in the presentation and passage of the national budget, due to the Parliament being prorogued in November 2014, its dissolution in 2015, and elections being held in May 2015. The budget was not presented until August.
“This delay meant that many government agencies were unable to carry out their planned programmes for the year. Many projects were held in abeyance, while only a few projects which were ‘rolled over’ from the previous year attracted funding. At the same time, the atmosphere of uncertainty and tensions surrounding the holding of general elections, led to investors postponing decision in many cases,” the Report stated.
GINA added that the report has indicated that growth is expected to surge in the second half of the year and is projected to reach 3.4%, as a result of the measures outlined in the budget.
According to highlights presented from the report, growth was recorded in a number of key sectors in the first half of the year.
It said sugar production grew by 1.6% to reach 81, 271 tonnes, while rice production rose by 15.3% to 359,960 tonnes, compared with last year’s record high first-half production of 312,283 tonnes.
Production in the other crops sub-sectors saw a 5% increase· The livestock sector also recorded growth by 15%, which was credited to growth in poultry, egg, and mutton and milk production.
Manufacturing output also registered an increase by 7.1%, which was said to be driven by a 15.3% increase in rice milling as a result of the bumper crop.
Growth was pegged at 2.5% at in the services sector, although there was a 13.2% decline in the construction subsector.
Declines were also recorded in the fisheries and natural resources sectors.
According to the report, the fisheries sector continued a downward spiral and contracted by 11.6%. The decline is being blamed on overfishing and possible under-declaration, combined with smaller fleets, lower harvesting in aquaculture, piracy and the occurrence of sargassum seaweed.
The forestry sector also recorded a 9.8% decline and unusual May/June rains, which created conditions that were not conducive to harvesting, were blamed.
The report said too that the mining and quarrying sector declined by 17.4%, reflecting a fall in gold, bauxite, and stone production by 16.2%, 18.6% and 54%, respectively.
It was noted that gold prices continued to fall, reaching a five-year low, while there was also extensive smuggling of gold, which was estimated to be as much as 15,000 ounces per week.
These factors are believed to have led to a sharp drop in declaration. In addition, the report noted that the bauxite industry also experienced declining international prices, which contributed to the 18.6% decline in production in the first half of 2015 compared with the same period in 2014.
‘Things are picking up’
Despite the decline, Jordan told GINA that there were indications that economy appeared to be picking up.
“Things appear to be picking up based on some amount of statistical evidence and some of anecdotal evidence. Anecdotal in the sense that in speaking to the average man in the street, the taxi driver and so on, they have been telling me that things are picking up, they are not saying business is good but, they are saying things better than a month or two before,” he was quoted as saying in a recent interview.
“I think, all and all we can expect things to be more and more on track as we had envisaged in the budget and we hope that talk of slowdown not necessarily disappears but, could be at the bottom of our lexicon by the time the next budget comes out,” he added.
Jordan credited political instability in the country prior to the May 11, elections as having contributed to the decline. However, he said consumers are gaining confidence with the stable political climate and are moving on from the uncertainty of the elections season.
“The budget is over, people have been paid their salaries and their back pay and there is more monies that is going to be circulating in the economy between now and December,” he noted.
“When you have political instability or a political situation that is not normal people do several things. One, they hold back on their investment. You tend to hold on to your money, some capital flight takes place where people try to get out their monies just in case, so unlike a tap that you can turn on and off with ease when people make those decisions it takes a while after political stability returns for those economic decisions now to be reversed,” he added.
Jordan noted too that for the first time in recent years, a decline in remittances has been recorded and it has attracted international attention.
“I am saying that remittances aren’t at the state it was at a while ago. It could also be due to the general slowdown in the world economy itself…. It is perhaps one of the worst in recent times, the slowdown but, luckily by the third quarter they have begun to see signs of the pick-up [in the global economy], so there could be a pickup in remittances later on in the year,” Jordan noted.
He also did not rule out the effects of the possible crippling of the underground economy due to the implementation of the recently passed Anti-Money Laundering and Countering the Financing of Terrorism Act.
However, he said in the absence of substantial statistics, no definitive conclusion can be drawn as to whether the law and its implementation are making it more difficult for criminals to launder proceeds from illicit activities. “If I were to offer an opinion, I would say that it could be one of the contributing factors simply because it has always been rumoured that our economy really was standing on more or less two legs, the parallel economy – heavily financed by drugs,” Jordan said.
He added that under the new government, increasing drug busts have led to the capture of high-profile traffickers. “So that definitely will have an overall effect on the economy,” he said.
Meanwhile, Jordan also said Guyana and the region are currently navigating the withdrawal of international banks that are closing their operations in Caribbean countries.
“They are becoming very risk averse so one and two banks have already pulled out in one and two countries,” he said.
He added that the Governor of the Bank of Guyana, Dr Gobin Ganga, has been actively involved in staging a rearguard action to stave off the withdrawal since it would have widespread implications for banking and transactions in the Guyana economy.
