Guyana’s informal economy ranks second in the English-speaking Caribbean according to a recent study.
The findings of the study prepared by regional economist Dr. Amos Peters estimates the size of Guyana’s informal economy at between 35 – 44 per cent, just behind Jamaica which is estimated at between 35-45 per cent.
The informal economy comprises a diversified set of income-generating economic activities and workers which are not regulated or protected by government. While the concept had originally applied to traditional self-employment it has, over time, expanded to include wage employment in unprotected jobs. In the instance of Guyana the informal sector has swollen as high unemployment has compelled persons to create new categories of unregulated, mostly service-oriented jobs.
Noting that globally, informal economic activity is on the rise, the report says that in any modern economy, “the extent of unreported and unrecorded economic activity is cause for concern.” According to the document, information about the size and character of informal sector activity is critical for effective and efficient decision making about how best to allocate a country’s resources, adding that gathering information about unofficial activities is challenging since, in many instances, participants in the informal economy shy away from being publicly identified. “This problem is further compounded by the fact that there are several different approaches to defining the informal economy and estimating its size, causes, and impact,” the report adds.
The size of the informal sector is estimated at between 20–30 percent in The Bahamas, 26-33 per cent in Trinidad and Tobago, 30–40, per cent in Barbados and 26-33 percent in Suriname, which along with Jamaica is estimated to be the highest in the region.
According to the report the study’s primary goal “is to apply commonly used methods to determine the size of the informal sector in the heterogeneous Caribbean countries.” It says that “the extent of hidden or unrecorded economic activity has several implications for the sustainable economic management of these countries, including implications for tax revenue and determining what the optimal tax burden should be.” Informal activities are customarily hidden from tax authorities and represent potential revenue gain.
The report goes on to state that unrecorded activity distorts national income accounts and policies that derive from these statistics.
“The results of the study are based on two methodologies, the electricity consumption method and the currency demand method. The study also considers results and information obtained in other studies in making a final evaluation.”
Ironically, the rise of what is commonly described as the informal economy in Guyana is widely regarded as a manifestation of the ingenuity of unemployed Guyanese who are prepared to create jobs mostly in the services sector.