Like the daily news, what goes on in the global economy is important to your country’s sustenance and thus will affect how comfortable your life will be today, tomorrow and the next five years from now.
The global economy includes some of the world’s largest importers and exporters of essentials needed on the international trade market. And small, poor, developing countries like Guyana, must always be on the lookout for how prices are shifting and how it can bring in revenue by providing some of what it has to offer on the world market.
Even with the abundance of certain products and raw materials, if the demands by leaders of the World Market like Russia, China and the United States are on a decline, it will mean less money for a country like Guyana.
Take, for example, Guyana’s Forestry Sector. Some five years ago, Guyana’s forestry industry was booming. It was considered one of the most successful and lucrative ventures any local or foreign investor could be a part of.
One of the biggest world leaders that demonstrated a serious interest in Guyana’s forestry sector was China. Guyana’s lush yet exotic species of woods was more than enough to lure some of the biggest logging companies in China, one of which was BaiShanLin Forest Development Inc.
Statistics from the Ministry of Finance show that in 2014 Guyana recorded a massive increase in production volumes which was found to be at 530,000 m3. This represented an increase of 21 percent over production figures in 2013 which was 437,000 m3. Additionally, exports of forest produce in 2014 saw Guyana bringing in revenue to the tune of US$54M. Even this was a stark increase by 38 percent over the 2013 value of US$38M.
However, by the turn of 2015, a number of developments in the forestry sector led to a sharp decline in export and production figures. One of the major causes has been the decline in the need for Guyana’s logs in China.
As of February last, forestry production amounted to 21,900 cubic metres compared with 25,319 cubic metres in February 2016. This resulted in production reaching 37,074 cubic metres, year-to-date, compared to 51,052 cubic metres in 2016.
The aforementioned simply goes to show the impact global leaders can have on the economy of nations like Guyana.
With this in mind, it becomes even more important to be mindful of the economic health of nations within the global economy, so that Guyana’s authorities can also begin to do better forecasting about budgeting and finding other avenues to stimulate income for the nation.
Below are a few snapshot points for how Guyana has fared thus far with certain products it needs and exports in the international market.
Global prices for Guyana’s major traded commodities saw modest increases in February 2017 except for sugar and rice.
Compared to February 2016, prices rose for all the commodities, except logs and rice, which declined by 4.1 and 4.4 percent respectively.
Of the commodities, aluminum increased the greatest by 3.9 percent. This was largely driven by China’s Air Pollution Control regulations implemented to reduce the production of the country’s coal-reliant aluminum, which is among the most carbon intensive in the world and very polluting. These regulations are putting downward pressure on prices which has continued to rise 21.5 percent year-to-date.
In February 2017, crude oil was priced at US$55.49 per bbl., indicating a modest increase of 1.1 percent. This was due to the Organization of the Petroleum Exporting Countries’ (OPEC) production being almost unchanged from January, as a slight improvement in compliance was offset by production recovery in Nigeria, which was exempt from the quota.
The free market global price for sugar declined by 0.2 percent in February to US$0.45. Compared to February 2016, however, the price has increased by 52.8 percent.
For rice, there were decreases in both the 1 and 12 month price change, with a decline of 2.7 percent and 4.4 percent respectively.
The international gold price rose by 3.5 percent in February. Gold prices have been trending upwards amid geopolitical anxiety and strengthening of the US dollar.
Data, statistics provided by the Ministry of Finance, Bureau of Standards
at a Glance
The latest U.S. economic data has been solid, revealing slow but stable growth of the U.S economy. The ISM manufacturing index rose from 56.0 to 57.7 percent in February, indicating that factory activity was picking up, which could also mean GDP growth could accelerate in the first quarter.
In February, The Guardian International Edition warned that Trump’s presidency poses threats to global economy, despite the predicted possible boost to economic growth from his planned infrastructure spending, tax and red tape cuts. Key risks include possible disruptions to trade relations, limits on migration; that affects the amount of money foreign workers in the U.S send home, and “confrontational exchanges” between policy makers that could spark swings in currencies and other markets.
For Europe, Brexit may offer an opportunity for the European Union. The European Union believes it stands a better chance of striking a free trade deal with India after the United Kingdom leaves the Union. This follows the United Kingdom post-Brexit trade deal with India being threatened by Prime Minister Theresa May’s visa crackdown.
Headline inflation rates have recovered in advanced economies with the bottoming out of commodity prices, but core inflation rates have remained broadly unchanged and generally below inflation targets.
Additionally, inflation picked up in China as capacity cuts and higher commodity prices have pushed producer price inflation to positive territory after more than four years of deflation.
Keeping up with the developing world will require a number of economic shifts and changes in the way business is done in Guyana. One transformational move that is going to be needed is diversification. For example, it has been over 50 years, and Guyana’s economy remains standing on six traditional sectors (sugar, rice, bauxite, timber, gold and manufacturing) for its upkeep. The performance, to date, in most of these sectors, shows clearly that the time has come for diversification as they have indeed grown weary.
In the sugar industry, for example, the signs are clear that Guyana must move towards the scaling down of production for international exportation and place its emphasis on supplying the domestic demands.
Guyana can certainly take a page out of the books of countries like Belize, which has diversified its sugar industry in many ways, such as large scale ethanol production and the refinement of white sugar among other products.
These changes, which are needed to keep up with the global community, will not happen overnight. But the efforts, however, must be made now, lest the nation is left behind in the dark ages.
(Article taken from the Guyana Inc. Magazine Issue 27)