Guyana: Fastest Growing Economy in the World
By end-2023, one of Latin America’s smallest countries could have a 100% increase in its Gross Domestic Product. Guyana, a small South American country with fewer than 800,000 people, is expected to have the world’s fastest economic growth. The World Bank and the International Monetary Fund (IMF) estimate that the English-speaking nation bordering Brazil, Venezuela, and Suriname could see a close to 100% growth in GDP by the end of 2023, compared with the end-of-the-year figures of 2021. In terms of growth, Guyana has already outpaced the global average. During the Coronavirus outbreak of 2020, the world’s economies collapsed, but Guyana’s GDP increased by 43.5%, and by 19.9% in 2021.
Powered by the rapid economic growth, President Ali has led Guyana through a period of rapid transformation, and the Government has laid out a masterplan for rapid development and transformation. Moreover, they have demonstrated our ability to work tirelessly to make this vision a reality so that citizens can reap the benefits as soon as possible.
Several factors contribute to Guyana’s phenomenal growth: first, it is a very small economy (with a GDP of $7.4 billion), so any boost has a big impact; and second, it’s huge offshore oil discoveries will boost growth. A consortium of oil companies, led by Exxon Mobil (XOM), discovered 11 billion barrels of oil and gas offshore in 2015, some 190km (118 miles) from the country’s coast. In October of that year, Exxon Mobil reported two discoveries in the Sailfin-1 and Yarrow-1 wells in the Stabroek block, off the Guyanese coast. According to Rystad Energy, Guyana’s crude reserves account for one-third of global reserves since Exxon discovered them in 2015. The firm estimates that the government will receive more than $1 billion in oil revenue this year.
2022-2023 Growth Projections
It is estimated that Guyana will grow 57.8% this year and 25.2% next year, resulting in an overall GDP growth of around 97.6%. The World Bank predicts an increase of 47.9% for 2022 and 34.3% for 2023. Over the past two years, the GDP has jumped 98.6%.
Latin America and the Caribbean, on the other hand, will see growth of 3.5% in 2022 and 1.7% in 2023, according to the IMF.
Ashni Singh, Senior Finance Minister, said that the administration, which was led by President Irfaan Ali, recognized the importance of a diversified, strong economic base at the time of taking office and, as such, placed a high level of importance on the non-oil economy even during the early days of oil production. By modernizing the economy’s traditional pillars, the aim was to catalyze a rapidly growing and highly competitive non-oil economy. The nation’s non-oil economic growth at the end of the first half demonstrates this. The growth forecast for 2022 builds on last year’s 4.6 percent.
PERFORMANCE BY SECTOR
Forestry, Agriculture & Fishing
In the first half of 2022, the agriculture, forestry and fishing sector grew by 10.9 percent, despite weaker performances in the sugar, rice and fishing sectors. It is now expected that the sector will grow by 11.9%.
It is estimated that the mining and quarrying sector grew by 64.6 percent in the first half of the year, with a revised forecast of 99.9 percent for 2022.
With 34.6 million barrels of oil produced in the first half of the year, the petroleum sector expanded by 73.5 percent. Liza Unity FPSO began oil production in February, which resulted in this increase. The bauxite industry has grown by 31.9 percent in the first half of 2022, while the other mining and quarrying industries (sand, stone, diamonds, manganese) have grown by 36.3 percent.
Construction & Manufacturing
Wholesale and retail trade, as well as transportation and storage, all contributed to the 7.6 percent growth in the service industries. A 6.3 percent growth rate is now forecast for the services sector in 2022. According to estimates, the manufacturing sector contracted by 11.4 percent in the first half of the year, but is expected to grow by 7.5 percent in 2022.
Public and private construction activity intensified in the first half of 2022, resulting in a 20.4 percent rise in the construction sector.
During the first half of 2022, the overall balance of payments recorded a US$100 million deficit, primarily due to higher fuel and capital import costs.
Export receipts increased by US$2,330.2 million, outweighing imports by US$506.6 million. These receipts increased largely as a result of higher oil export earnings, while non-oil export earnings increased marginally by 2 percent.
Credit to the private sector increased by 7.5 percent to $308.3 billion in line with the expansion in non-oil productive sectors.
Credit was expanded to the services sector, manufacturing sector, for real estate mortgage loans, and to households. The sums of $110.3 billion, $34.2 billion, $98.6 billion, and $38.5 billion increased by 8.2 percent, 26.7 percent, 3.2 percent, and 5.1 percent, respectively.
A surge in commodity prices has resulted from supply disruptions caused by the Russian invasion of Ukraine. It has not spared Guyana. As a result of higher food and energy prices, consumer prices were 4.9 percent higher than the end of 2021.
The government implemented a suite of measures to ease the burden on the population as a result of these inflationary pressures. During the presentation of Budget 2022, the excise tax on petroleum was reduced from 20 percent to 10 percent, and it was further reduced from 10 percent to zero in March. Moreover, government provided $800 million in cash grants to households in hinterland and riparian communities, besides purchasing and distributing fertilizer to farmers across the country.
The inflation rate for 2022 is now expected to be 5.8 percent due to current geopolitical tensions.
FUND FOR NATURAL RESOURCES
The two producing FPSOs lifted five lifts of profit oil during the first six months of the year. Moreover, government received US$307 million in revenue from profit oil, along with royalties of US$37.1 million, in the first half. After withdrawing US$200 million in May, the cumulative balance on the NRF was US$753.3 million, including interest income.
For 2022, the government anticipates 13 lifts of profit oil, and is now projecting US$1.1 billion from the sale of the country’s share of profit oil, along with US$147.7 million in royalties.
During the Government’s current term, policies and programmes have already laid a solid foundation for realizing the commitments made in the 2020 Manifesto, on the basis of which this Government was elected. The government is committed to growing the economy and improving the wellbeing of all Guyanese, thus building a modern and prosperous Guyana.
Over the next few years, Guyana will have the fastest-growing economy in the world. Oil production grew from virtually zero in 2019 to over 100,000 barrels per day (bpd) in 2021, and the World Bank projects it will reach more than 400,000 bpd by 2024 as new projects come online. There have been dozens of oil discoveries in recent years, including one as recent as October 2022.
Public spending should be fueled by the ensuing boom in fiscal revenue. Combined with the government’s local content policy to promote Guyanese individuals and firms in the energy sector, this should support the non-oil economy. However, the outlook is not without risks. It is possible that the burgeoning energy sector will lead to cronyism and weaken institutions, as well as divert resources away from manufacturing and services.
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