Inflation for the 12-month period up to October 2016 was 1.1% and the rate at the end of the year is expected to be 1.3% while next year’s projected figure is targeted at 2.5%.
This was disclosed in the 2017 budget presentation yesterday by Finance Minister Winston Jordan.
Addressing key statistics he said that the balance of payments deficit this year will contract to a projected US$29.2 million, from a deficit of US$107.7 million, in 2015. The current account balance is expected to move from a deficit of US$181.5 million, in 2015, to a projected deficit of US$100.8 million, at the end of 2016.
The merchandise trade balance will strengthen from a deficit of US$340.4 million in 2015 to a projected deficit of US$185.5 million, for 2016. Merchandise exports will rise from US$1.2 billion, in 2015, to a projected US$1.4 billion, in 2016, an increase of about 19 per cent. Robust growth in exports of gold, which are projected to rise by 55 per cent, or US$277 million, will make up for shortfalls of 17 per cent and 15 per cent in the exports of rice and sugar, respectively, Jordan stated.
The capital account surplus is expected to increase slightly from US$71.4 million, in 2015, to US$71.6 million, for 2016. Net capital to the non-financial public sector is anticipated to strengthen from net outflows of US$94.8 million, in 2015, to net outflows of US$44.3 million, for 2016. This is due to a large reduction in external debt amortization.
The balance of payments deficit will be financed by debt relief and forgiveness of US$55.4 million, which will allow a projected US$26.1 million increase in net foreign assets of the Bank of Guyana., the Finance Minister stated.
Gross reserves of the Bank of Guyana are expected to be equivalent to more than four months of import cover at the end of 2016, well above the three-month minimum benchmark for reserve adequacy.
Monetary aggregates of broad money are expected to grow by 3.8 per cent over the 12 months ending December 2016, reflecting moderate real GDP growth and low inflation, Jordan told the House. Within broad money, he said that currency in circulation will show strong growth, rising by 9.8 per cent over the period, while demand deposits will expand by 7 per cent. Time and savings deposits will grow more slowly, increasing by a projected 2 per cent over the 12 months ending December 2016.
Net domestic credit of the banking system is expected to appreciate by 4 per cent over the 12 months ending in December. Credit to households will increase strongly, expanding by 9.1 per cent over the period. However, credit to private businesses is projected to be weaker. Credit to the agriculture and services sectors will grow by 2.4 per cent and 3.9 per cent, respectively, while credit to the manufacturing sector will drop by 2.8 per cent. Lending was particularly low to private enterprises in the mining sector, sliding by a projected 16.6 per cent.
Jordan said that commercial banks remained well-capitalised in 2016, despite a slight increase in the non-performing loan ratio to 11.3 per cent as at the end of September, up from about 10 per cent in December 2015.
The Finance Minister said that interest rates remained low this year. As at September 2016, the small savings rate remained flat at 1.26 per cent. The weighted average lending interest rate fell marginally compared to its level in December 2015, falling from 10.56 per cent to 10.40 per cent, in September 2016. Interest rates on Treasury Bills also decreased slightly during 2016. The discount rate on 91-day Treasury Bills fell from 1.92 per cent, in December 2015, to 1.85 per cent, in September 2016. The discount rates on the 182-day and 364-day Treasury Bills dropped by similar margins, declining from 1.81 per cent to 1.68 per cent, and from 2.38 per cent to 2.17 per cent, respectively.
The Guyana dollar exchange rate with the US dollar remained stable at 206.5 through November 2016 and is expected to remain at this level for the rest of the year. The Guyana dollar appreciated by about 10 per cent against the British pound since the Brexit vote, consistent with the pound’s general decline against world currencies, Jordan said.
Jordan said that the overall balance of payments in 2017 is expected to improve dramatically to a surplus of nearly US$20 million, from a deficit of US$29.2 million, in 2016. The deficit on the current account is projected to lessen substantially to US$45.3 million, from US$100.8 million in 2016, on the back of a much-improved merchandise trade balance. Exports are expected to increase in 2017, as both production and prices of commodities are slated to rise, while gold receipts are projected to continue to strengthen. Gold, sugar, and rice, which account for nearly 70 per cent of all exports, will see a rise in prices.