INTRODUCTION
Understanding the financial relationships of the global economy is not as dreary as it sounds. Well, perhaps it does for a brief moment, but I assure you, it is an extremely important issue to consider, especially for economies like Guyana. The Guyanese economy is small. For more than 50 years, this ethnically diverse nation, with a population of just over 700,000, has been highly dependent on the exportation of primary commodities like gold, rice, sugar, timber and agriculture. What is also characteristic of Guyana’s economy is that it is often times carried by the strength of just one sector. In the 1940’s and 50’s, it was the sugar industry that single-handedly carried the economy through hard times. In the 70’s and 80’s, it was bauxite that took the nation through the economic storm. This was then followed by the agricultural sector. When that fell through, gold rose to the occasion and surpassed everyone’s expectations with remarkable production figures. But there is a reason why there has been a shift from one sector to another. Apart from the lack of diversification in our small market, the happenings of the global market plays a major role in what could be Guyana’s lead sector today and what would be in shambles tomorrow. Yes, that is how vulnerable we are to the external ebb and flow of the global market. To ensure that this point has been firmly grasped by you, the reader, let me paint you a simple scenario. Guyana makes a number of products on an annual basis and it hopes to sell these to various nations on the world market. In one month, the nation is able to produce 500,000 containers of coconuts. Countries like Europe, the USA and China are interested and make their purchase, which totals $100M. This would be favourable to Guyana, especially if its sales to the CARICOM region only saw it making approximately $30M on the same amount. But what if the economic conditions and desires for coconut changes on the world market, where Europe has decided to institute a ban on all coconuts entering its jurisdiction; China decides that it will begin to grow its own products thereby reducing its reliance on such imports and the USA, well it has turned its attention to bottled coconut water being produced by one of its neighbours at a more affordable price. These are just few of the scenarios that can play out in the world market. The growth of sectors across the world market gives an indication of what is in demand and how the industries of nations like Guyana would be affected. It is on this premise that we will examine what the outlook is expected to be for 2018.
WORLD ECONOMIC OUTLOOK 2018
Guyana’s Finance Minister, Winston Jordan, was able to break down the International Monetary Fund (IMF)’s World Economic Outlook as at January 2018. The economist noted that while there was great skepticism about the possibilities of 2018, it appears that there would be a light at the end of the proverbial tunnel. The Finance Minister asserted that global output is estimated to have grown by 3.7 percent in 2017, slightly higher than in 2016. He said that the increase in growth was broad based, with a notable upsurge in Europe and Asia. He said that this improvement has allowed for the revision in the forecasts for 2018 and 2019, to 3.9 percent, an increase of 0.2 percentage points. The economist said, “Guyana is strategically and geographically located within Latin America and the Caribbean, where recovery is expected to strengthen, with growth projections for 2018 and 2019 being revised upwards to 1.9 percent and 2.6 percent, respectively.” “Also projected is an 11.0 percent rise in Latin American exports coupled with price hikes of commodities like oil and minerals. These forecasts account for the improved economic scenarios for Chile, Brazil, Peru and Colombia, which are expected to see the biggest increase in growth across Latin America from 2017 to 2018.” In spite of this improved outlook, the Finance Minister warned that Guyana and the rest of the region still face several challenges, including climate-related catastrophes, as was so horrifyingly demonstrated by Hurricane Irma, and a plethora of other tropical storms of increasing intensity, frequency and severity. So even while we are excited about the possibilities that can be realised from this global outlook, he insisted that Guyana and its sister nations must remain vigilant to any unexpected shocks.
GUYANA’S OUTLOOK FOR 2018 The Finance Minister was careful to note, in his 2018 budget speech, some of the targets for Guyana in 2018 and what the economic outlook is expected to be. Jordan said that the real growth of the economy is targeted at 3.8 percent, with the non-sugar growth rate anticipated to be 4.6 percent. He said that the Government anticipates that growth across all sectors, with the exception of sugar, will allow this target to be realised. The economist noted that growth in the agriculture, fishing, and forestry sector will be driven by the expected expansion in the various sub-sectors, except sugar. Building on the solid performance in 2017, Jordan noted that the rice industry is expected to expand to 617,353 tonnes, an increase of 2.5 percent. The other crops subsector is anticipated to grow by 2.3 percent, as diversification efforts continue and productivity gains are made. The forestry subsector is expected to grow by 8 percent to 320,760 cubic metres, as the reallocation of concessions continue, new concessionaires establish operations, and stimulus measures are put in place in 2018. The Finance Minister revealed that the livestock and fishing subsectors are projected to grow by 2 percent and 2.3 percent respectively, driven by consumer demand. On the other hand, sugar production is expected to contract by 24 percent to 115,447 tonnes. Overall, the agriculture, fishing, and forestry sector is anticipated to contract in 2018 by 0.7 percent, largely due to the challenges facing the sugar industry. As for the mining and quarrying sector, the Finance Minister announced that this is projected to rebound in 2018, expanding by 5 percent. He noted that this growth will be driven by the bauxite, gold, and quarrying industries. The bauxite industry is projected to produce 1,897,205 tonnes, resulting in an increase of 23.3 percent. Jordan stated that gold declaration is budgeted at 736,000 ounces, an improvement of 3.3 percent, as a result of favourable prices as well as measures by regulatory bodies to improve recovery rates and ensure compliance. Other mining is anticipated to grow by 3.8 percent, premised on increased activity in the construction sector. Despite the expectation that rice and other manufacturing will expand in 2018 by 2.5 percent and 2.4 percent respectively, the Finance Minister noted that the decline of the sugar industry will depress the overall growth of the manufacturing sector, which is expected to remain virtually the same. Overall, the Finance Minister stated that exports are projected to rise in 2018, as both production and commodity prices are expected to rise, with gold receipts projected to continue to strengthen. Gold, timber, and other exports, which account for nearly 78 percent of all exports, will see an increase in export earnings. Growth in merchandise imports is foretasted at 5.7 percent driven primarily by non petroleum imports. The Finance Minister also stated that the capital account surplus will increase marginally to US$212.9 Million, on account of higher net inflows to the private sector in the form of foreign direct investment which will be driven by expansion of activities in the petroleum industry