For developing countries like Guyana, there is always the constant battle of keeping at bay domino effects of shifts in the global fiscal platform. And the fact that the nation, for the time being, remains heavily dependent on its traditional revenue earners, only serves to further exacerbate the economy’s vulnerability. As such, there is only so much that can be done to limit the shock waves that occur when the international markets are under the weather. In fact, the outlook for the global economy during the first half of 2016 was somewhat pessimistic. The International Monetary Fund (IMF), in its World Economic Outlook, twice revised its projection for 2016 global growth downward since its January update, when growth was forecast at 3.4 per cent. In April, the projection was revised downward to 3.2 percent, in response to weak economic performance in many economies, and on July 19, to 3.1 percent, following the well known Brexit vote and its attendant impact on global markets. According to data provided by Guyana’s Ministry of Finance and the Bureau of Statistics, the global commodity prices showed some recovery during the first half of 2016, with the average price of crude oil reaching US$47.70 per barrel in June 2016, compared with an average of US$36.57 in the month of December 2015. However, the June 2016 oil price remained below the June 2015 price of US$61.30 per barrel. The Ministry of Finance said that the slight recovery in oil prices during the first half of 2016 for Guyana was attributed mainly to the tightening of global oil supplies. Similar to the price of oil, the international gold price also showed signs of recovery, reaching US$1,276.40 per ounce in June 2016. The Ministry of Finance noted that this was higher than the price of US$1,075.74 per ounce in December 2015 and the price of US$1,181.50 in June 2015. Likewise, the aluminum price increased to US$1,591.15 in June 2016 compared with US$1,497.20 in December 2015. However, despite this progress, the Finance Ministry found that aluminum price remains below the price achieved in June 2015 of US$1,687.73. Diamond prices, as measured by the International Diamond Exchange (IDEX) diamond index, have declined by about 5 percent from the end of the first half of 2015 to the end of the first half of 2016, though prices may have moved differently for diamonds of varying size and quality. World sugar prices also recovered slightly in the first half of 2016, from US$0.32 per kg in December 2015 to US$0.43 per kg in June 2016, a price more than 50 percent higher than the June 2015 average of US$0.27.
The Finance Ministry said that rice prices also showed signs of recovery as international benchmark prices. As reported by the World Bank and Oryza, at the end of June 2016, the prices were notably higher when compared with December 2015 and at or above their June 2015 levels. Furthermore, the prices for timber improved slightly in the first half of 2016. The Bureau of Statistics said that international benchmark prices for logs trended upwards, while prices at the end of June 2016 were generally higher than those at the end of June and December 2015. However, despite slight recovery of commodity prices in the first half of 2016 compared to prices at the end of 2015, financial market uncertainty and the expected slow global growth in 2016 are likely to be a drag on demand for commodities going forward. The Finance Ministry said that the trend towards recovering international commodity prices has mixed implications for Guyana’s economy. On the upside, economists in Guyana noted that rising global commodity prices present opportunities for the nation’s commodity export sectors. They opined that higher gold prices would benefit small,
artisanal miners, improving their incomes and enabling them to invest more in their trade. The Ministry of Finance also commented that higher
aluminum prices would flow through to bauxite prices, encouraging growth in the industry. Additionally, increases in prices for agricultural commodities would have positive impacts on the rice and sugar sectors. The Finance Ministry said that securing higher prices is especially important to the profitability of the sugar industry, which has struggled to keep production costs below revenues while adapting to the removal of preferential prices on the European Union (EU) markets. On the downside, rising global commodity prices are likely to increase the costs of Guyana’s imports as well. It was found that higher commodity prices could be reflected in higher prices for imported consumption goods, as well as imports of inputs for key sectors, such as fuel, fertilizers, and chemicals. A rebound in oil prices would likely flow through to higher prices at the pump, and more expensive electricity production costs, which could lead to higher tariffs. On the whole, the Ministry of Finance said that it is likely that the value of both exports and imports would increase.
