Guyana’s economic expansion extends beyond the Oil Sector

WHILE Guyana’s economy continues to be one of the fastest-growing in the world, primarily fueled by revenues from its extensive oil deposits, the nation is also witnessing significant growth in other sectors. This trend raises the question: how is the non-oil economy performing, and what impact is inflation having on the country?

In the Latin America and Caribbean region, Guyana has experienced exceptional economic growth over the last four years. In 2019, the country’s GDP grew by approximately 5%, and in 2020, it surged to 43% before declining to 20% the following year. In 2022, the growth rate jumped again to 63%, driven by substantial revenues from the burgeoning oil and gas sector.

In  2023, the growth rate settled at 30%, still heavily supported by the oil and gas industry. For the first half of 2024, the economy recorded a growth rate of 33.9%, reflecting continued strength in the oil and gas sector.SKNVibes News sought insights from the International Monetary Fund (IMF) on the performance of Guyana’s non-oil economy and recommendations for further diversification. According to an IMF representative, the non-oil economy has been expanding at a remarkable pace.

“The non-oil economy in Guyana has been growing very rapidly. The non-oil real GDP growth rates were about 12 percent from 2022 until the first half of 2024, much higher than in the previous years (about 3 percent on average over 2006-21), supported by very high growth rates in several sectors, especially construction,” IMF Staff wrote.

Since the discovery of large oil reserves and the start of commercial drilling, the Guyanese government has embarked on numerous capital projects to upgrade the country’s infrastructure. These initiatives include constructing new roads, expanding housing, and undertaking other large-scale development projects aimed at supporting long-term growth.

The IMF highlighted the government’s commitment to diversifying the economy. “The government is implementing many modernization plans to diversify the economy, including establishing a regional food hub, increasing electricity supply, and building schools, hospitals, roads and bridges to increase human capital and productivity, which will further boost non-oil GDP growth in the next few years,” an IMF representative explained.

Rising Cost of Living and Inflation Concerns

Despite rapid development, many residents have expressed concerns about the rising cost of living, particularly in local markets and supermarkets. In response to these concerns, the IMF noted that inflation in Guyana has been relatively low compared to recent years. After peaking at 7.7% in July 2021, inflation has moderated. As of July 2024, the inflation rate stood at 3.4% (year over year), up from 2% at the end of 2023, but still below the 2021 high, which was partly due to the impact of severe flooding.

IMF Policy Recommendations

To avoid potential economic overheating, the IMF staff suggested several policy measures during their 2023 Article IV consultation. Recommendations included tightening the monetary policy stance, implementing macroprudential tools as needed, and designing a comprehensive fiscal policy framework to guide public spending based on a medium-term fiscal strategy.

Source:https://www.sknvibes.com